A comprehensive financial plan covers all financial areas of your life. These include, but are not limited to, the following:
- Cash Flow & Debt Management
- Risk Management (Insurance)
- Employee Benefits
- Financial Independence/Retirement
- Income Tax
- Estate Planning
- Planned Lifestyle Goals
You must know where you are now before you can figure out where you are going.
Cash Flow & Debt Management
Understand what income is coming in and expenses that are going out. Track assets and liabilities and develop a plan for debt repayment. Come up with the correct sized emergency fund for your own personal situation.
Risk Management (Insurance)
Review of life, disability, health, long-term care, property, and liability insurance to align them with your personal financial risks and goals without being sold products.
Review of employee benefits package including group retirement plans, group insurance options and deferred compensation. Gain a detailed understanding of the offerings available and how they work.
Review investments as a whole portfolio. Understand risk tolerance, investment costs, asset allocation and diversification within asset classes.
Retirement projections based on current situation including a Monte Carlo analysis. Understand which accounts have penalties for withdrawals before age 59.5. Learn about Required Minimum Distributions (RMD’s) and which accounts they apply to. Review government programs, such as Social Security and Medicare, so that you know how these programs operate and fit into your overall financial picture.
Uncover any tax planning opportunities unique to your situation including Roth conversions, asset location, deductions and credits, tax gain and loss harvesting and a general understanding of how your personal taxes operate.
Calculate and plan for education costs, college savings opportunities, 529 plans and how they operate, financial aid and student loan repayment strategies.
Review of current estate plan documents (wills, trusts, powers of attorney, guardians), beneficiary designations and account titling. Understand what would happen in a family emergency and create a legacy plan to support your loved ones.
Planned Lifestyle Goals
Plan for major purchases, marriage, children, inheritance, and assistance to loved ones.
It is important to note that these different areas of the comprehensive financial plan are not exclusive of each other and, often, financial decisions have implications involving more than one planning area.
Once you have established your financial plan, you are able to measure your progress towards your goals. It is important to update your plan with current information and for any major life changes. Also note when progress is being measured, it is important to understand why you are ahead or behind—is it market returns or could it be spending or something else? Knowing the reason for the discrepancy will allow you to refine any previous assumptions which will in turn give you better projections with confidence.
Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.