Financial planning is a process of addressing the financial challenges that life presents by developing a “personalized plan” to achieve your financial goals. Nowhere is this more evident than in real estate planning. More than any other wealth-building asset, real estate is joined at the hip with the life cycle.

Typically, young household purchase small, inexpensive homes; middle-aged household purchase larger, more expensive homes; while retirement households return to small, less expensive homes. There is no avoiding the impact of life’s needs and challenges on
property purchases.

Tax Planning 

Tax planning in the broader context of financial planning is all about reducing, postponing, avoiding, or eliminating the tax consequences of a financial activity. You should seek tax-planning advice from a professional tax accountant.

Real estate is a favored asset in the U.S. tax code and offers perhaps one of the few opportunities for house-holds to take advantage of the tax system in their financial planning activities. The favored tax treatment on property is a long list and includes: the mortgage interest deduction, property tax deduction, passive loss treatment, capital gains exclusion, deductibility of certain closing (settlement) costs, and 1031 transfers, to name a few. I recommend that you discuss these issues at length with a professional financial advisor and / or accountant.

Investment planning brings excitement to the financial planning process. Building an investment portfolio provides opportunities to earn healthy returns on your hard-earned money and sometimes to speculate on a penny stock that may become the next Microsoft. Some households get to taken with investing that they mistake an investment portfolio for financial planning, which could be costly in the long term.

There are a number of steps you need to follow for investments planning that are worth mentioning. These steps help establish the criteria for building an investment portfolio. Included in this portfolio are the usual suspects – stocks, bonds, and mutual funds.