Steps to Creating a Financial Plan

Your list of goals may include: saving for retirement, buying a house, starting a business, paying education costs for your children or charitable giving. But for each goal added to your list, you’ll need to precisely define its costs, time frame and priority. You’ll encounter a number of trade-offs as you start to prioritize and lay out a timeline for your goals. Getting these details down on paper will allow you to work more successfully with your advisor to create a solid financial plan. And that can help you get to where you want to go.

When we talk about time frames, we mean the time between when you make an initial investment and when you’ll need the money.

If your goal is to accumulate higher education funds for a 2-year-old child, you’ll need the money starting in about 16 years. If that child is 15, you’ll need the money starting in about three years. Every investment has its own time frame depending on the goal, and the time frame shrinks as the goal approaches.

Why should you define your time frame? Successful investors make a point of defining the time frame for a goal before taking action. Because a clearly defined time frame helps when deciding which investment options are right for the goal. If the time frame is short, financial advisors generally recommend more stable, less volatile investments. With a longer time frame, some short-term volatility may be acceptable.

Without a clearly defined time frame, choosing the appropriate portfolio of investments is a guessing game. And investing should be about making educated and well-informed decisions that are right for your situation — not guessing. Remember, a goal that’s 15 years away will eventually be 10 years away, then five years away, and so on.

Your comfort with risk levels refers to how you feel about market volatility. Specifically, how will you respond when investment values decline unexpectedly? Will you fret over losses and sell your holdings to prevent further decline? Or can you remain calm and stay with your financial plan?

Capacity for risk is also an important factor. While you may have nerves of steel in the face of market volatility, that doesn’t necessarily mean you should take big risks. Your capacity for risk is defined by where you are in your life journey, along with your plans and goals. Risk capacity changes as you get married, change jobs, have children, or buy a house.

The right amount of risk in your investments can give you the confidence to stick with your financial plan even when the market takes an unexpected dip. But if you start feeling nervous or uncomfortable about your investments, be cautious about how you respond. A knee-jerk reaction can cause you to sell when prices are low, rather than hold onto an investment that has the potential to rebound and erase paper losses.

At Franklin Templeton, we believe in the importance and value of having a financial advisor to guide you in your investment journey.

Just like how you would rely on a doctor for your health matters, having a professional and well-trained financial advisor for your wealth matters is of paramount importance. For this reason, our mutual funds are sold through financial advisors and platforms because we believe investors can benefit from ongoing expert advice. A financial advisor can prove invaluable in helping you define your needs and narrowing the search for investments suitable to your unique financial objectives.

A financial advisor can help to:

• Determine your financial goals and risk tolerance to develop a solid asset allocation plan designed to meet those goals
• Provide guidance and expertise on tax, retirement and investment planning
• Assess the potential risks and rewards of various investment options
• Monitor and manage your investments over time and recommend timely adjustments to your portfolio to keep your asset allocation plan balanced and on target
• Provide market knowledge and planning expertise
• Offer objectivity, support and guidance during periods of market volatility

We suggest you choose a financial advisor in much the same way you would choose any other professional. Rely on family and friends who have had positive experiences. If you get the names of several advisors, speak with each of them. You’ll be making important, long-term financial decisions with their guidance, so you want to feel comfortable sharing personal information with them and be sure their approaches and areas of expertise are a good match for you.

If you currently do not have a financial advisor, you can approach any of our authorized distributors.