Gathering Data Can Be Vital for Your Personalized Financial Plan

Big data is key to personal financial planning, but it can only be done with the right documentation.

8 Min Read
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Big data has had a profound impact on the finance industry. The financial analytics market is projected to be worth $11.3 billion within the next two years.

Before getting into how gathering data can help your financial future, you should understand what it is. In simple terms, gathering data is a process where you collect all your personal documents and financial statements to serve as the foundation for a personalized financial plan. Many people think this has to do with spreadsheets and computers, but as you’ll see, there is a lot more to it than that.

It is true that data analytics is key to helping reach your personal financial goals. However, you are going to need to actually get the data first. You won’t be able to use sophisticated machine learning tools to track the trajectory of your finances without having the data on hand first.

Necessary Financial Documentation Before Using Data Analytics

There are a lot of ways that big data affects the financial industry. However, the impact on personal finance is a bit different. You need to understand what documentation is necessary before you can start leveraging data analytics tools for maximum benefit.

As part of the data gathering process, you need to collect the most appropriate types of documents. When meeting with a financial advisor to help you devise a financial plan, you’ll want to have everything in somewhat of an order. So, you’ll want to gather any of the documents listed below that apply to you.

  • Bank statements for all checking and savings accounts
  • Monthly statements that show the monthly payment and balance owed for car loans
  • Statements for your investment and retirement accounts
  • Credit card statements (be sure they show the current outstanding balance)
  • Paperwork for your mortgage loan and the most recent statement from the lender
  • Statements for life insurance, including group term life provided by your employer
  • Statements for student loans
  • Child support or alimony statements
  • Disability insurance documents
  • Documents specific to any business you own
  • Declaration pages for renters or homeowners insurance, auto insurance, and commercial or umbrella policies
  • Statements or documents for any other financial accounts not mentioned

Along with these things, you’ll need to provide the financial advisor with additional paperwork or information. Paperwork that you may need to facilitate your personal finance planning with big data include the following:

  • Assets – For this, you’ll need paperwork for anything you possess that generates cash flow. These cover your bank accounts, rental properties, investments, and even hard cash.
  • Liabilities – This has to do with the money you owe or your debt. Some examples are your car loan, mortgage, credit card bills, student loans, etc. Keep in mind that most people have more debt than their income (liability versus assets). If this is what you see, don’t panic.
  • Relationships – Finally, create a list of your spouse, children, and other beneficiaries named in your insurance, as well as those you plan to add at some point.

While everyone organizes documents differently, one easy approach is to purchase a binder with rings and pockets. Remember that when pulling together your account statements for credit cards, bank accounts, investments, and so on, you only need to provide the financial advisor with the most recent.

This information can be very helpful, especially with important functions like budgeting. If you’re curious why data gathering is important when creating a personalized financial plan, it comes down to formulating both short- and long-term goals.

Short-term Goals

By creating short-term goals, you’ll have a clear vision about what you want to accomplish over the next several months to years. For example, perhaps you want to pay off all your credit card debt, or maybe you want to develop an innovative or aggressive way to save for your retirement.

Long-term Goals

Typically, “long-term” covers any goal that extends beyond five years. This might include purchasing your first house or possibly paying off the mortgage on a home you currently own. Although you might feel it’s impossible to achieve some of the things you list in this category, it’s not. With proper planning and a good financial foundation, you can accomplish just about anything.

Help with Gathering Your Data

So, you don’t like to enter so much data manually? Who does? Thankfully technology has come a long way in terms of linking to bank accounts, brokerage accounts, mortgages, and credit cards. There is financial planning software like WealthTrace and Mint that allow you to import this type of information to help you run financial planning, retirement planning, and budgeting. This ability makes it so much easier to get started when running any type of financial planning calculations. It is usually also more accurate since manually entering data can lead to errors.

Get Ready for Change

Rather than dread the process of developing a personalized financial plan, look at it as an opportunity to get ahead and become more stable. If you’re worried about a financial advisor judging you for the amount of debt you owe, remember, they offer a professional service to help people get on the road to financial freedom.

To get started, gather all of the data mentioned. Initially, it might seem a bit confusing. At some point, though, everything will come together in the form of a solid personalized financial plan. While collecting everything you need, ask yourself how often you want to follow up with your advisor. Also, is there any special type of information or access you want from that individual? When you sit down with the advisor, you can discuss these and other topics.

The primary reason for going through the data gathering process is to make it easier to develop a financial plan specifically for you. Ultimately, you want the plan to maximize your money now so that you can achieve both your short-term and long-term goals.

Using Big Data for Personal Financial Planning Requires the Right Documentation

You will find that big data is very important for modern financial planning. You can use a lot of great data analytics tools to better budget and plan your financial future. However, having the right documentation is a must.

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