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What does a Financial Plan look like?

January 2016

There is so much information out there about financial planning but I frequently get asked the question, "What does a financial plan actually look like?" A comprehensive plan is customized to gather and analyze your personal data so that recommendations can be made to meet your specific financial goals. However, as the popularity of financial planning has grown, the actual plans seem to be getting longer and longer. Here's what you can expect in a comprehensive financial plan:

  • A summary of your personal data and financial goals.
  • A list of your assets (what you own) and your liabilities (what you owe).
  • A cash flow statement of all the income you bring in and all the expenses that go out of your household budget.
  • A review of your insurance policies to make sure that your assets are protected. This review includes health insurance, life insurance and long-term care insurance, if you own it.
  • A review of your recent tax return to see if there is anything you can to minimize taxes now and in the future.
  • A review of your estate planning documents, including your will, trust, health directives and any durable powers of attorney. If you don't have any or all of these documents, a recommendation will be made to help you put the information together so that an attorney can prepare them for you.
  • A review of your retirement accounts, including any employer provided plan, IRAs etc. Are you contributing enough or taking advantage of the benefits offered with these plans? What will the accounts be worth when you retire?
  • A review of your investment accounts. What is your risk tolerance (how much can you afford to lose) and your required return (what should you be earning on your investments based on the amount of risk you're willing to take)? The accounts are consolidated and an asset allocation analysis is made (What percentage of your investments should be in stocks? In bonds? In real-estate?).

The plan will be presented to you in a bound format and will include charts and graphs along with a summary, recommendations and a timeline to implement any changes or additions that are needed.

Sometimes the thoroughness of a plan like this can be overwhelming. Is there too much information to absorb at one time and is the list of recommendations too daunting to actually implement? A good financial plan is designed to put you at ease, not cause you to become anxious.

So an alternative would be to build up your plan, one module at a time based on the priorities of your goals and needs. Financial planning is an ongoing process and it should take whatever time is necessary to actually understand and implement the recommendations. And most importantly, it should be monitored and reviewed with your planner on a regular basis.