Organizing your income can be an overwhelming task if you do not have a background in finance. Whether you’re getting ready to retire or saving for your first home, there are many factors to consider that extend far beyond simply putting money into a savings account. From high-risk investments to tax free savings accounts, there are a variety of ways to maximize your earnings and reach your financial goals.
Two of the key terms that are often mistaken for one another are “income allocation” and “income planning.” Contrary to popular belief, these two financial services have a number of differences, all of which affect one’s ability to grow wealth.
At Miser Wealth Partners LLC, our financial advisors offer the knowledge and experience necessary to help clients organize their income in the most beneficial and secure way possible. Continue reading to learn some of the key differences that you need to know between income allocation and income planning.
Income planning is a broad term
During income planning services, a financial advisor will assess the client’s full financial picture. This process involves an in-depth analysis of the individual’s current spending patterns, various streams of income, personal goals, and other important lifestyle factors. Essentially, when you hire an incoming planning specialist, this service can be used as an opportunity to understand where you are now and what steps you need to take to reach your financial goals. If you are starting to think about retirement for example, income planning will help you determine a realistic timeline and budget that will allow you to achieve your desired standard of living.
Income allocation facilitates financial growth
Where income planning takes a broad approach to your current financial standing and where you want to be in the future, income allocation services zero in on where exactly your earnings should be going in order to reach those goals. This may involve stock market investments, savings accounts, assets, debt repayment, and more. While income allocation is a part of income planning, it deals with the more technical side of how to achieve your financial goals. A financial advisor may provide various strategies to optimize your primary source of income, and recommend ways to accumulate passive income. This will help maximize your savings while enabling you to live your life according to a budget that suits your lifestyle.
Income planning requires a breadth of knowledge
To successfully create a financial plan based on the client’s current income as well as their short and long-term goals, an advisor must offer extensive knowledge in multiple areas. This includes a deep understanding of the stock market, pensions, debt repayment, asset protection, and more. Income allocation is a specific element of income planning, which makes it easier to seek out specialized professional services. Clients must however, be extremely selective in choosing an income planning specialist to help advise on their overall financial picture.
Income allocation involves risk assessment
During income planning services, clients will discuss generally, their willingness to allocate income to high risk investments. The income allocation process however, is where a thorough risk assessment must be done. This may involve researching real estate trends, projections for the stock market, and determining the client’s financial flexibility before recommending investment opportunities. Conversely, clients who are not in a position to take risks with their money should focus on safe investments, and explore savings accounts that accumulate interest over time. An income allocation specialist must help determine the right approach for you.
If you are looking for trusted income planning and allocation services, Miser Wealth Partners LLC can help you reach your goals. Contact us today to learn more about our services.