Gathering Qualitative Financial Planning Data

The second step in the financial planning process is gathering financial data. Data, for purposes of financial planning, comes in two forms; quantitative and qualitative.

When gathering the needed information keep in mind that the more information that you have the more robust your financial plan will be. This is due to the fact that the more data that is available the better analysis that we can conduct.

It also should go without saying that if the financial planning analysis is robust the derived information and decision made from it should be of great quality. The following is a list of qualitative data that you should gather as you start your financial plan.

Qualitative Financial Planning Information

You can choose to start gathering qualitative data as part of the financial planning goal setting process in step one. Depending on how comprehensive you would like your financial plan to be, the following list of qualitative information should get you headed in the right direction.

List of Goals and Objectives - Step one in the financial planning process is to list your financial planning goals and objectives. Initially focus on your life goals and then determine what resources you will need to accomplish them (financial needs).

Risk Tolerance Assessment - Your optimal investment strategy heavily depends on your personal preference towards the relationship between risk and reward. Take some time and think about how much capital you are willing to risk losing. This will help determine your risk tolerance.

Past Experiences with Money - In addition to risk tolerance, our past experiences with money can affect our preference towards various financial instruments and capital allocation strategies. This information will help shape your financial plan's content and ensure that it is aligned with your personal preferences.

Feelings Towards Investment Products - Usually by the time we sit down and create a financial plan, we already have some experience and biases towards different investment products. These can be good or bad experiences concerning stocks, bonds, annuities, insurance or options.

Career Stability - When creating a financial plan, considerations concerning career security is an important assumption. We need to be able to plan for all potential scenarios that could impact financial solvency in both the short and long run.

Life, Education and Retirement Expectations - This information can be included in the goal setting step, however understanding what your family’s expectations are is extremely important. In addition understanding expectations can help when attempting to prioritize financial planning goals and objectives.

Financial Management and Budget Issues - Try to think of the financial planning process as a chance to start fresh. With that said, if there has been poor budget decisions or less than optimal financial management in the past, its time to get it all out on the table, learn from it and move on.

When I started writing this post is was going to be about the entire financial planning data gathering process. However based on the length of the qualitative section, I decided to break it into two parts. In any case, I hope this information helps you gain financial freedom.