If you look at just about every financial advisor firms’ website out there, it will state they provide comprehensive financial planning. The crazy thing is that nobody really understands what that means. October is National Financial Planning month so today I want to dig into what a comprehensive financial plan is.
Comprehensive financial planning is a multi-step process but I’m going to summarize it into 3 main steps:
- Organize your finances to understand where you are today. This includes your income expenses, assets, liabilities, insurance, etc.
- Visualize where you want to be in the future. This can also be called goal setting but the idea is to come up with concrete financial goals. This can include when you want to retire and how much income you want, purchasing a more expensive home, funding college for your kids, or taking that dream vacation.
- Create a plan to accomplish your goals.
Once we know where you are today (#1) and where you want to go (#2), then the financial strategies and options that are needed become a lot clearer.
Let’s take a step back for a moment – the whole goal of financial planning is to create the life you want. It’s not all about sacrificing for the future or enjoying as much as possible today. It’s a delicate balance between the two. Too often we see money as something that’s good or bad when we should see it as a tool.
A comprehensive financial plan should also cover all areas of your financial life but especially these six areas:
- Cash Flow
- Risk Management
- Tax Planning
- Retirement Planning
- Investments
- Estate Planning
If any of the 3 steps or 6 financial planning areas are missed, then it’s not comprehensive financial planning. Over the next 6 weeks, we’re going to dig into each of the 6 areas that should be a part of your financial plan. Make sure you check back each week to learn more.