Creating a Comprehensive Financial Plan - Part 2

In our last post, we covered the essentials of a financial plan and a quick checklist of what you will want to include. Comprehensive financial planning helps you create a roadmap for your financial future.

It is important to remember that you will have events happen in your life that may cause you to make changes in your financial plan. You will want to check your plan once a year at least. When you work with a financial advisor, building out a lengthy financial plan may seem very appealing at first, but without regular check ins and updates, your plan may not meet all your needs as you change and grow.

Comprehensive financial planning must include the following for you and your family:

1. Establish and define your relationship with your financial planner.

After you have selected a financial planner, you can explain or document the services that you will be providing. You and the planner should also agree on how long the professional relationship should last and on how decisions will be made.

2. Gather data and think about your goals.

When you meet with your financial planner, he or she should ask for information about your financial situation. You must define your personal and financial goals and then understand the time frame required to achieve your results. You will also want to discuss how you feel about risk. The financial planner should gather all the necessary documents before giving you advice.

3. Analyze and evaluate your financial status.

Assess your current situation to figure what you must do to meet your goals. Analyze your assets, liabilities, and cash flow. Look at your current insurance coverage, any investments you have and any tax strategies you have put in place. If you don’t have any or all of the above, you can develop these with your planner.

4. Develop financial planning recommendations and alternatives with your planner.

Based on the information you provide, your financial planner will offer financial planning recommendations that address your goals. Go over the recommendations with your planner carefully to make sure that you understand them.

5. Put your financial planning recommendations in place.

Decide how the recommendations will be carried out. Carry out the recommendations and meet with third parties such as attorneys or stockbrokers if needed.

6. Keep track of the financial planning recommendations.

Will you be in charge of monitoring your progress towards your goals or will your planner be? Decide. If the planner is in charge of the process, the planner should report to you periodically to review your situation and adjust recommendations as your life changes.

Financial planning must include:

  • Retirement planning
  • Insurance planning
  • Tax planning
  • Emergency fund planning
  • Estate planning
  • Investment planning
  • Education expense planning and
  • Planning for the small business owner

Set Measurable Goals and Review Your Plan

When you create your comprehensive financial plan, remember to set measurable goals. Your financial decisions can affect your financial plan so make appropriate choices in your daily life. Look at your plan periodically.

Start Now

Also do not wait to start a financial plan till you are old. Most importantly, do not wait until a money crisis to begin financial planning. Start with whatever you have and begin to envision and lay out your big picture. Financial planning is not the same as investing. Investing is thinking about your future. Financial planning takes into stock your immediate present, your prior debts and obligations, your future goals and plans and helps you plan for the care of your loved ones.

A comprehensive financial plan will help you put together the pieces of your financial picture. With an effective financial plan in place, you’ll be able to focus on your goals and understand what you will need to do to achieve your goals.