A financial plan is a comprehensive evaluation of an investor's current and future financial state by using currently known variables to seek to anticipate future cash flows, asset values and withdrawal plans. Most individuals work in conjunction with a financial planner and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing financial plans. These metrics are used along with estimates of asset growth to determine if a person's financial goals can be met in the future, or what corrective steps need to be taken to pursue those goals.
Financial goalsA financial plan is based on an individual's or a family's clearly defined financial goals, including funding a college education for the children, buying a larger home, starting a business, retiring on time or leaving a legacy. Financial goals should be quantified and set to milestones for tracking.
Personal net worth statementA snapshot of assets and liabilities serves as a benchmark for measuring progress towards financial goals.
Cash flow analysisAn income and spending plan determines how much can be set aside for debt repayment, savings and investing each month.
Retirement strategyThe plan should include a strategy for striving for retirement independent of other financial priorities. The plan should include a strategy for accumulating the required retirement capital and its planned lifetime distribution.
Comprehensive risk management planIdentify all risk exposures and provide the necessary coverage to protect the family and its assets against financial loss. The risk management plan includes a full review of life and disability insurance, personal liability coverage, property and casualty coverage, and catastrophic coverage.
Long-term investment planInclude a customized asset allocation strategy based on specific investment objectives and a risk profile. This investment plan sets guidelines for selecting, buying and selling investments and establishing benchmarks for performance review.
Tax mitigation strategyIdentify ways to potentially minimize taxes to the extent permissible by the tax code. The strategy should include identification of tax-favored investment vehicles that can reduce taxation of investment income.
Estate plan strategiesCreate arrangements for the preservation and distribution of assets with attention to settlement costs and taxes. Review and update estate panning instruments, such as wills, inter-vivos trusts, power of attorney, medical directives, and marital trusts with client's attorney.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
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