Monitoring Progress and Updating." Is your pay enough to achieve your own financial aspirations? What are your short-term … Once the plan is created, it's essentially a piece of history. Different Types of Financial Planning Models and Strategies, Determine Financial Goals - Assessment, Budgeting and Goal Setting, What is Optimism Bias - Definition, Effects on Financial Decisions, What is Personal Financial Planning? Table of Contents The 6 Step Financial Planning Process – Do It Like The Pros. In nine steps, you have a nice framework to build on for the rest of your life. Just do it! Do I need more equipment? But what if you want to keep the rate of return at 8.00%? Through training and experience, a CFP® professional is uniquely qualified to help their clients anticipate potential challenges and achieve their financial goals. Before you start building it, you should know what financial goals would you like to accomplish and what will be the time duration for it. Whether you do it yourself or hire an advisor, remember to keep referring back to the steps as significant life or financial changes occur. If you want to plan for the future, you need to understand your current. When you completed all the above four steps in financial planning process s referenced above, you will get a clear vision for your financial goals and what you have to do to accomplish them. With so many different variables to consider, your plan needs to develop, which means to evolve with your needs but remain within your capabilities and risk tolerance. Learn these financial planning steps and improve your personal finances. Also, how far along are you in your goals? He should actually set the goal of buy a life insurance policy which will give maturity benefit of Rs.1 crore or Rs.2 crores. Step 1: Defining the Client-Planner Relationship; Step 2: Collect Data, Determine Expectations and Prioritize Goals; Step 3: Analyze and Evaluate Financial Status; Step 4: Developing the Plan Recommendations; Step 5: Implementing The Plan; Step 6: Monitor progress; Repeat! Examples and Templates, What is Business Financial Planning? Taking first step will be tough as you might not be confident whether your plan will work or not. What are your feelings about investing in the stock market? This information may include a range of topics, from financial goals, to feelings about market risk, to dreams about retiring in the Caribbean. The 6 steps of financial planning are followed by fiduciary advisors and Certified Financial Planners to create recommendations and financial plans for their clients. That way, not only won’t it cost you a penny, but you stand to reap the long-term benefits. Develop a plan . After this you should start implementing this six steps in financial planning process of your personal plan and let us know, how it worked for you! The good news is that it's not hard to create one. He is a Certified Financial Planner, investment advisor, and writer. It outlines exactly what your financial goals are (where you’re going) and then provides the steps you need to take to get there (how to get there). In this first step of the financial planning process, you will determine your current financial situation with regard to income, savings, living expenses, and debts. What Will a Good Investment Advisor Do for Me? Establishing the goal or relationship is where the adviser introduces himself or herself a client or prospective client and explains the financial planning process. The Balance does not provide tax, investment, or financial services and advice. Gather data . 2. Goal like, you wish to retire at the age of 55 years, live a debt free life after 40 years of age, need to travel to another country for further studies, need to allocate funds to buy second home, saving the funds for your child marriage, need to send your child to another state for higher education and much more. You may also want to do as the professional financial planners do and sit down and reevaluate your plan on a periodic basis, such as once per year. This series of how-to articles makes it easier to create a personal financial plan and get your money in order. But he don’t realize the importance of inflation and calculating the future value required after 20 years. Investing involves risk including the possible loss of principal. We are sorry that this post was not useful for you! Learn more about the Steps in the Financial Planning Process. Do you have a will? Evaluate and Implement your Financial Plan: 6. Review your Financial Plan Periodically: Your email address will not be published. The Six Steps of Financial Planning are: 1 Establishing and defining a professional relationship The initial contact is dedicated to establishing a clear understanding of your immediate needs and/or concerns as well as getting a firm grasp of what services the financial planner provides. You could increase your savings rate to $300 per month and still come close to your goal with $990,000. You should be aware of the life cycle approach of financial planning process to structure your personal goals. However, not everyone wants to go through the entire process. Financial planning is the plan needed for estimating the fund requirements of a business and determining the sources for the same. 5 steps to financial planning success Define. Professionally written financial plans typically encompass all areas of a person's life: debt management, investing, retirement planning, estate planning, financial forecasting, insurance, risk management, assets and liabilities and net worth, and a plan for periodic review. Here some examples of open-ended questions you can use in your own planning: Do-it-yourselfers can fulfill this step by simply getting to know themselves a bit better with open-ended questions, like these: The step of establishing the goal forms a guiding philosophy to direct investment objectives, cash management, insurance needs, and other financial instruments to help achieve your specific financial goals. If you want to achieve financial freedom, you have to prepare a plan. Read E-Learning Tutorial Courses - 100% Free for All. Analyze data . Identify and select goals. Is it true that you are ready to deal with your home loans and personal loans? I trust a few activities like adapting saving techniques, strengthening your relationship with your funds, living positive life and keep inspirational others are the ways in which you can accomplish your financial goals. Here is the step by step financial planning process which includes six steps in financial planning process which will assist you. This gets down to answering the question What is my financial plan? Let's assume you have 30 years until retirement, you've already saved $50,000, you expect an 8.00% return on your investments, and you can save $250 per month going forward. Your email address will not be published. He specializes in financial planning, investing, and retirement. Additionally, identify risk and time associated with it for each and every alternative Plan-B action. Why you should have a financial plan. 7 Steps to Creating a Smart Financial Plan. This is one of the important steps out of six steps in financial planning process which should be your mitigation plan for all your actions. Personal Financial Planning Steps 1. Financial Planning Process Step 1: Establish the Goal / Relationship . But as simple as this sounds, many people find that implementation is the most difficult step in financial planning. 1. Why You Need Personal Financial Planning . Determine your Current Financial Situation . Accessed July 15, 2020. It is important that you should ask yourself that where are you now? Financial planning requires devising alternative solutions that are achievable for each individual. It essentially includes generating a financial blueprint for company’s future activities. You may begin to wonder what may happen if you fail. A personal or household financial plan provides the roadmap you need to make progress. You should be honest and have correct data with you about your financial situation. A great financial plan takes into account all the aspects of your funds, balancing everything need to desire aided by the personal goals you have got for the future. Financial planning in 7 steps. The six steps of financial planning are part of the Certified Financial Planner Board of Standards' code of ethics and standards. With this typical personal goals in mind just like apartment buy, wedding, upbringing of children’s, then, he begins Rs.10,000 as expenses all month. Here are six steps to create your financial plan. Having financial goals is the foundation for your financial success. The relevant data you gather is required to make recommendations for the appropriate strategies and financial products to reach your goals. This is where inaction can grow into procrastination. Below, you’ll find ten steps to create a solid financial plan. The ability to plan for your financial future, including both expected and unexpected changes, and stay on target to meet your goals requires forethought and discipline. Financial planning is not complicated, but it is not easy either. You might be a salaried individual, an expert or a businessman, check your current financial condition. "Financial Planning Process." For example, if you are gathering data for retirement planning, some of the key information needed is your annual income, savings rate, years until proposed retirement, age when you are eligible to receive Social Security or a pension, how much you've saved to date, how much you will save in the future, expected rate of return and more. Successful investors will tell you that just getting started is the most important aspect of success. To do so, you will need to calculate your total assets, which include everything from money in checking or investment accounts to your equity in your house and car. For example, what is your time horizon? Financial Planning Process Step 1: Establish the Goal / Relationship, Financial Planning Process Step 2: Gather the Relevant Data, Financial Planning Process Step 3: Analyze the Data, Financial Planning Process Step 4: Develop the Plan, Financial Planning Process Step 5: Implement the Plan, Financial Planning Process Step 6: Monitor the Plan. By using The Balance, you accept our. Do you have children? Continuing the retirement planning example in Step 2, the data you've gathered can help you arrive at some basic assumptions. Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities. You may need to do a few changes in your way of life with the alternative goal to accomplish your financial and life goals which are your life achievement goals and might be your retirement planning goals as well. 1. Establish and maintain a system of financial … Now think events or changes beyond your control, such as tax laws, interest rates, inflation, stock market fluctuations, and economic recessions. What are the Six Steps in Financial Planning Process with Examples. Step 2: Develop Financial Goals In der Finanzdienstleistungsbranche wird Financial Planning gemeinhin als Dienstleistung mit dem Ziel angeboten, Finanzprodukte zu vertreiben. Why do you think you feel that way? Evaluate and Analyse your Plan-B: Think about your present life condition, your own values and your financial factor. An important objective is to first start building your financial plan, which can give you financial freedom. Gather. Do you have life insurance? Certified Financial Planner Board of Standards. With a firm idea of your goals and a good grasp of your budget, you can now begin to think about the next steps in the financial planning process. The financial planner … 4. Do you have any money saved yet? Although, you should know how you can save a lot, how much insurance you should take, people must know their personal goals. CFP Board’s Code of Ethics and Standards of Conduct “ Code and Standards ”) provides detailed requirements for the Financial Planning process and increases the number of steps in the Financial Planning process from six to seven. A practicing CFP (TM) is required to know and follow these steps, starting with establishing the advisor/client relationship, all the way through implementing and monitoring the plan. But it is always advisable that when you prepare your Plan-A as your action item to achieve your goals at the same time you should be ready with Plan-B. Financial Planning is process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of a concern. however, about objectives at personal finance, we do not plan them. Originally posted January 14, 2020. So that's the first thing you should ask yourself. A financial planner is someone hired to help you plan for a specific goal like retirement or investments, or someone who advises on various financial topics, including taxes, saving, insurance, and more. The importance can be outlined as- Adequate funds have to be ensured. Think about your present life condition, your own values and your financial factor. Define Your Goals. Save my name, email, and website in this browser for the next time I comment. Then you break this goal in year-on-year milestones to keep checking the progress on your milestones periodically. Do I need other new resources? So, all incomes and expenses (no matter how small) have to be accounted for. Here are seven expert-approved financial planning steps to help you get on track. What Is a Chartered Retirement Plans Specialist (CRPS)? The CFP Board includes a seventh step, Updating the Plan. 1. Before you get started with the actual “planning” of the financial planning process, the first step you should take is to review your current financial standing. 10 Steps to a DIY Financial Plan Write down your goals —One of the first things a financial planner would ask you is what you want your money to accomplish. This is why the plan needs to be monitored and tweaked from time to time. 1. If these financial planning steps are followed you will build a comprehensive financial plan that can guide you throughout your life. The Financial Planning Standards Board (FPSB) has developed a six-step process that is widely used by financial advisors and brokers when meeting with clients. Means, Examples and Process, What is Financial Planner? It comprises of six steps in financial planning process your will likely help one in assessing and planning your current as well as future financial needs plus developing a better financial plan to match their specific goals. This is the first and important step out of six steps in financial planning process. Financial planners do this by asking open-ended questions, which are questions that cannot be answered by a simple yes or no. A good financial plan is guided by your financial goals. Here are the six steps in the financial planning process, according to the Certified Financial Planner Board of Standards: 6 Financial Planning Steps Understand personal and financial circumstances. Through this saving he buys the mutual funds or best life insurance plan with the maturity benefit of Rs.25 lakhs after 20 years. Accessed July 15, 2020. Let us take an example of financial planning process to understand. The adviser may ask open-ended questions to … This ensures effective and adequate financial and investment policies. Here, you should check alternative investment products available in the market and select the best ones as your alternative Plan-B dependent on your goals. The purpose of establishing the goal or relationship is to form the foundation or purpose of planning itself. Why not plan for yourself like the professionals do it? Don't worry. If you can handle taking more market risk, you could increase your exposure to stocks in an aggressive portfolio of mutual funds and assume a 9.00% rate of return. For that reason I have put together a list of 6 alternative things you should do today with or without a full plan. Using the acronym EGADIM will help you remember the six steps of financial planning: Establish the goal/relationship . Let’s go over some financial planning basics, that will help you to establish a financial plan that will have concrete steps you will actually be able to accomplish. Develop. Maybe you’ve tackled a few of the steps, or maybe you haven't started a financial plan. How a Financial Advisor Can Help You Meet Your Goals, Financial Management Apps and Tools for Young Adults, Track Your Retirement Planning Progress With These Important Questions, How a Financial Plan Can Help You More Than Financial Goals, Financial Goals to Reach Before You Turn 30, 6 Steps You Should Take to Prepare for Retirement. Track Where Your Money Is Going. It's called "financial planning" for a reason: Plans evolve and change just like life. Each item includes a set of steps for making it happen. Be the first to rate this post. Roger Wohlner is a financial advisor and writer with 20 years of experience in the industry. The financial planning professional informs the client about the financial planning process, the services the financial planning professional offers, and the financial planning professional’s competencies and experience. What Are the 6 Steps of Financial Planning? What are incomes, expenses, assets and liabilities? Write down your financial goals. This where you begin devising alternative solutions that are in the next step. Is your retirement goal achievable? To do so, start by calculating your net worth. beschreibt die Vorgehensweise, bei der unter dem Primat der Erhaltung der Liquidität (Zahlungsfähigkeit) eines Privatkunden die vorhandenen Vermögenswerte unter Berücksichtigung individueller Prämissen gewinnbringend strukturiert und investiert werden. Develop a Strategy to Meet your Goals:5 3. Here we are going to discuss about six steps in financial planning process with detail analysis. You have to decide exactly what it is you need your finances to do, and what those strategies will need to accomplish. Personal Financial Planning: The 7 Step Guide. Think of what can change in your life, such as marriage, the birth of children, career changes and more. This lays the foundation for the financial planning process and provides clarity about the client’s financial destination. So now it’s time to take first step toward achieving your goals and rest of the steps will automatically follow your actions. Although you have the plan developed, it takes discipline and desire to put it into action. Establish goals and define client-planner relationship: The first step to financial planning is establishing goals and defining the client-planner relationship. No votes so far! Similar to the priorities created when visualizing your financial targets, personal financial planning requires a set of financial benchmarks to be met before you start saving towards your lifetime financial goals. You don't need to start out at a high level of savings or at an advanced level of investment strategy. Implementing the plan means you are putting your plan to work! Life Cycle Approach of Financial Planning Process Example: Importance of Six Steps in Financial Planning Process: 5. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Now it’s the time where you should start drafting your financial plan to achieve your goals. The plan stays on paper if you don’t execute it. The actual saving will be around Rs.30,000 per month from salary income. Do I need to hire more staff? Establish your Goals and Objectives:4 2. The financial planning professional and the client determine whether … The personal Financial Planning process consists of the following six steps: Establish and define the client-adviser relationship. Here are eight steps to help you get started with the financial planning process: Step 1: Review Your Current Savings and Spending Habits. Identifying current financial situation In the first step, Oberoi informs that if we don't know what our income and expenses are, how we will know how much the surplus is. Let's say you need $1 million to reach your goal. Some financial planners consider this to be part of monitoring but it's helpful to remember that plans often require updating.. Now that you know the 6 steps of financial planning, you can apply them to any area of personal finance, including insurance planning, tax planning, cash flow (budgeting), estate planning, investing, and retirement. Build your own financial plan: A step-by-step guide. After all, you have to know what you want to accomplish in order to actually accomplish it. Analyse. Past performance is not indicative of future results. In order to write a financial plan, you'll first have to have a clear picture of where your finances are now. Draft and Implement your Plan:7 5. Review your Goals and Market Situation:8 Why Financial Planning is Necessary … But it is also true that you will be rewards only when you start taking risk. "Code of Ethics and Standards of Conduct - 7. 1. You could learn how to invest with just one fund or you could start saving a few dollars per week to build up to your first investment. Gather and Analyze Information:6 4. Updated on June 24 at 8:18 am. Watch the Next Video. 4.9 (16) Contents1 Personal Financial Planning Process:2 Top 5 – Key Steps Involved in Personal Financial Planning Process:3 1. How to create a financial plan. You can recall the six steps by memorizing the acronym, EGADIM: Establishing the goal or relationship is where the adviser introduces himself or herself a client or prospective client and explains the financial planning process. This is one of the important steps out of six steps in financial planning process which should be your mitigation plan for all your actions. This give an idea of to what extend you need to manage in other to achieve your financial goal. Start by setting financial goals. Oberoi said that there are six steps to financial planning. We’ve put it all in one place for you. Is this enough? Updated November 03, 2020 . By working through a series of logical steps, we will help you gain a better understanding of the options available, and working together, we can devise and implement a suitable financial plan to target your goals. These steps can also be learned and applied by individuals for their own benefit. He has in mind that around Rs.60,000 will go in expenses and remaining will be his saving. If so, what are their ages? posted on 06-07-2019. With this you will be able to keep track of your progress by re-visiting it periodically. What are your financial weaknesses? How do you plan to save enough for retirement. Often, the initial assumptions are not quite enough to obtain the goal. Using a financial calculator, these assumptions will arrive at approximately $920,000 at the proposed retirement date of 30 years from now. You should think about what you want to accomplish at the start of a new year and ask yourself a series of questions: Do I need to expand? Forecast the extent to which these requirements will be met by internal generation of funds and the extent to which they will be met from external sources; 3. For example: If you are planning to live debt freedom life at the age of 40 then you should start building a financial goal which will be a road-map for your life achievement goals. 1. Review your strategic plan. Required fields are marked *. Your function associated with the six steps in financial planning process should assist you in strategy making your finance plan awesome that does match your objective and goals. Monitoring Progress and Updating. Develop the best plans to obtain the required external funds; 4. To this end, the planner should ask open-ended questions about needs, goals, dreams, objectives, risk-appetite, past experience, financial strengths and weaknesses, etc. Do you want to accomplish this goal in five years, 10 years, 20 years, or 30 years? It is typically done for 3-5 years-broad in scope and generally includes long-term investment, growth and financing decisions. Financial Planning Standards Board. If all other assumptions remain the same, and by increasing your expected return by 1.00%, your 30-year time horizon, and savings rates would bring you to a nest egg worth nearly $1.2 million! Because without some personal financial planning, you’ll never know if you’re veering off course. If you want financial security, you’ll need to know how to make a better financial plan. , businessman will have their goals to be accounted for five years, years... How-To articles makes it easier to create a solid financial plan that can be. Planning: Establish the goal/relationship financial Planner client determine whether … personal planning! A high level of savings or at an advanced level of investment strategy and amounts spent for items... Provide you with a great user experience to keep the rate of return 8.00! 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Planning ( i.e.. what are your feelings about investing in the stock market n't started a financial for... Important step out of six steps in financial planning are part of the Certified financial …... Planning financial planning steps followed by fiduciary advisors and Certified financial planners to create a solid financial plan a! And liabilities seven expert-approved financial planning process, programmes financial planning steps budgets regarding financial... Steps of financial planning process to structure your personal finances sorry that post... Establish goals and rest of the life cycle approach of financial planning activities you don ’ t execute.. Put it into action – do it like the professionals do it like the professionals do it the! Time associated with it for each individual your desired goals will be around Rs.30,000 per month and still come to. 4.9 ( 16 ) Contents1 personal financial plan: a step-by-step guide the step... To save enough for retirement Finanzprodukte zu vertreiben ten steps to create your financial.. Require new perspectives or changes to your goal to what extend you need to manage in to! Better financial plan around Rs.60,000 will go in expenses and remaining will financial planning steps rewards only when start! After 20 years step is to form the foundation for the same financial. Nine steps, or financial services and advice you arrive at approximately $ 920,000 at proposed. Key word in step 3: analyze the data you gather is required make! Experience in the stock market 2, the birth of children, career changes and.... Step 1: Establish the goal or relationship is where the adviser introduces himself or herself a or. What are your feelings about investing in the industry the 6 steps of financial planning '' a! To financial planning process consists of the life cycle approach of financial planning gemeinhin Dienstleistung. Client determine whether … personal financial plan the acronym EGADIM will help you arrive at some basic.. Code of ethics and Standards ’ re veering off course financial strengths here are... Be confident whether your plan will work or not or without a full plan life events may require perspectives... Followed you will be rewards only when you start taking risk said that are... Far along are you now and liabilities mit dem Ziel angeboten, Finanzprodukte zu vertreiben calculating. Some of your life at approximately $ 920,000 at the Balance buys the mutual funds or best insurance.