Comprehensive Financial Plan

​Do you take a comprehensive approach to planning your finances? If the answer is no, you’re not alone. According to a study from the Certified Financial Planner Board of Standards, only 19 percent of Americans could be classified as “comprehensive planners.” The remaining 81 percent either plan only for specific financial goals or don’t do any planning at all.1
 
A comprehensive financial plan is one that addresses your entire financial picture. It may include everything from retirement planning to investment management to risk management and much more. A comprehensive plan is often helpful because it can show you how financial decisions in one area of your life can impact goals in other areas of your financial life.
 
For example, you may have a plan for retirement. But do you know how your efforts to save for retirement impact other goals, such as saving for your child’s education or paying down high-interest debt? A comprehensive plan shows you the interaction between these goals so you can make more informed decisions.
 
Not sure whether your plan is comprehensive? Below are some of the elements commonly found in comprehensive financial plans. If your financial plan doesn’t include these elements, and possibly more, then you may need to re-examine your financial strategy from a more comprehensive perspective.

Objectives and Goals

Perhaps one of the most helpful aspects of a comprehensive financial plan is that it helps you prioritize and clarify your goals. If you’re like many Americans, you probably have many different financial objectives. For example, you may have goals for retirement, your child’s education, travel or some other large purchase.
 
How do you decide which goals to pursue and which not? How do you know how much money to allocate toward each objective? When you develop a comprehensive financial plan, you spend time examining each of these goals to determine how they should be prioritized. That helps you make more informed decisions about how to save.

Your Assets

The different portions of your financial plan will be integrated with each other and the different parts will include aspects of other sectors of the plan. On the assets pages of your plan are your investments and your retirement savings. Investments could include stocks, bonds, mutual funds and investment real estate. The plan should review whether your current mix of investments is appropriate to meet your long- and short-term goals. On the retirement savings side, the plan reviews the types of plans you have selected, how they are funded and if you have picked the best type of plan for your business.

Your Protection

The protection section of your plan covers the different types of insurance. Property and casualty products like auto and homeowner’s insurance are straightforward. As a business owner, liability insurance protects you and your business against legal actions. Life insurance is important to provide a standard of living to your family, pay estate tax bills or to cover business obligations.

Passing Along Weath

The estate plan portion of your financial plan covers how to ensure everything you worked for is passed efficiently to your heirs. This portion of the plan includes information about your investments, life insurance, wills and trusts and the disposition of your business assets. As you increase your wealth and move through the stages of life, the estate planning portion of your financial plan tends to become a strong force in the decision-making process for all parts of the plan.

Cash Flow

Think of cash flow as the fuel that powers your financial plan. You can use your free cash flow to save for retirement, pay down debt or pursue your other financial objectives. In your financial plan, you may develop ways to help you maximize your cash flow, such as eliminating high-interest debt or implementing a budget.

Investment Policy

There’s no single investment strategy that’s appropriate for everyone. Rather, your investment strategy should be based on your unique goals, needs and risk tolerance. Your comprehensive financial plan will likely include a section dedicated to investment strategy. You can then use that document to guide your investment-related decision-making in the future.

Retirement Planning

Retirement planning is a top financial priority for many Americans. After all, by the time your career is over, you likely will have spent decades in the working world. Retirement is your opportunity to take back control of your schedule and live life without the limitations that come with a busy career.
 
But how do you know if you’re saving enough money to find the type of retirement you want for yourself? How much money do you need to have saved? How will you pay for health care costs in retirement? What is your contingency plan if you are forced to retire early?
 
The retirement planning section of your comprehensive financial plan will answer these questions and many more. Once you take the mystery out of retirement planning, it becomes much easier to pursue your goals.

Estate Planning

It may not be pleasant to think about your own death. However, it’s an important part of financial planning. You may have loved ones who are dependent on you financially. Or you may want to leave a legacy for your children, grandchildren or other family members. The estate planning component in your comprehensive plan helps you determine which tools and strategies to implement to protect your legacy.
 
This is just a sampling of some of the elements that may be included in your comprehensive plan. Your plan will be based on your unique goals and needs.
 
Ready to develop your comprehensive financial plan? Let’s talk about it. Heritage Financial North can help you analyze your needs and create a strategy. Let’s connect soon and start the conversation.

Tax Planning

The tax planning part of your financial plan also coordinates with the other sections of the plan to ensure your financial choices are as tax efficient as possible. You pay personal and business income taxes and must always be aware of estate taxes. Tax planning works to avoid paying too much money to the government and keeping as much of your financial assets for you, your family and your heirs.