How To Create a Financial Plan Like a Pro | Family finances


A financial plan is the foundation of any good investor – a first step in creating a long-term strategy that holds up, whether your goal is to pay off debt or build wealth for generations to come.

Your financial plan is your compass when making decisions big and small that involve money. The big goals of life like own a house or financing a child’s education requires careful planning. And research shows that those who put that plan in writing are more confident in reaching their goals and tend to maintain healthier financial habits, according to Schwab’s. Modern Wealth Survey 2021.

There is no doubt among the experts about the importance of a financial plan, either. Keith Beverly, Managing Partner and Chief Investment Officer at Grid 202 Partners, says everyone needs a financial plan – the complexity of the plan will vary.

“When you come out of undergrad and have your first job, your financial plan may be simple, but you still have one,” Beverly says. “There can be different levels of complications and nuance for different individuals, but when you think of financial planning – insurance, taxes, estate planning and investments – these are the key areas. “

However, getting professional help with a comprehensive financial plan can be expensive and even impossible, as many advisors require minimum equity to engage in planning with a new client.

What is a financial plan?

A financial plan is a written document that describes the strategies, goals and objectives for an individual’s or a family’s money.

When created by a professional financial advisor, a comprehensive financial plan usually includes a list of recommendations that take into account a client’s goals and values ​​as well as external economic factors. No two plans are the same – and professional advisers typically don’t use a unique, universal template for every client – but many advisers apply the same general financial planning concepts from the start.

Content of your financial plan

Your financial plan can be as simple as you want or as complex as your circumstances require. While you don’t need to outline specific plans for each of these categories, the following list is a general guide to the areas you should consider when creating a financial plan.

  • Risk management: Examine your insurance needs.
  • Budgeting.
  • Emergency fund and debt management.
  • Retirement planning.
  • Education planning for a child or grandchild.
  • Planning of major expenses (lump sum purchases).
  • Estate planning.
  • Tax planning.
  • Investment portfolio management.

After reading this list, you should be able to select a few areas that you want to focus on and exclude areas that might not apply to your financial situation at this time.

First step: collect information

To plan a way forward, you must first find out where you are today.

When a professional counselor meets a new client for the first time, the focus of that meeting will likely be information gathering. Advisors should create financial statements and analyze that information before creating a financial plan.

To create a financial plan like a pro, you can’t skip this step. At a minimum, compile a list of the following: your current income streams, insurance policies, bank accounts, including retirement accounts, and debts.

Once you’ve listed the nuts and bolts in one place, take a moment to assess where you are at on a few qualitative silver questions before moving on to the next step. Ask yourself the following question: What is my tolerance for risk right now? How important is work-life balance to you? How much time do I really have to spend managing my money?

Step two: define financial goals and objectives

After taking the time to think about your financial situation, you may see obvious areas needing attention or you may just want to make a plan to maintain the progress you have already made. Either way, it’s time to list specific, quantifiable goals.

“It is crucial to prioritize among competing goals. In general, people can have whatever they want, but not all they want, ”says Edward Moyzes, CEO and founder of Strategic View Advisors, a subsidiary of Northwestern Mutual Private Client Group. “At this point, you are ready for a deeper analysis to clarify which priorities are achievable, what tradeoffs need to be considered, and how to align your existing wealth and future accumulation with your goals and values. “

Common financial goals often fall into one of these categories:

  • Educational goals.
  • Retirement goals.
  • Career goals.
  • Savings goals.
  • Charitable goals.

Step three: develop a strategy

At this point, financial plans start to differ significantly from person to person. At this point in the process, it’s time to formulate a plan to achieve the goals you just created for yourself and your family.

If debt management is at the center of your financial plan, for example, Moyzes says, “While debt is often a necessary part of financial life, it’s important to differentiate between debt that helps you build up money. wealth, like a mortgage, and debt that can destroy it, like credit cards. A financial plan must determine whether the structure (rate, duration, duration) of existing debt is most effective and whether consumer debt requires changes in spending habits.

If estate planning is a priority, Moyzes says your financial plan “could be as simple as a will or as complicated as a series of trusts.”

Developing a financial plan also requires anticipating future conditions and understanding the economic environment in which your situation finds itself. Think about how your income will develop over the next few months and how external factors like inflation, interest rates, and changes in tax laws might affect your ability to meet your goals.

Beverly says her firm closely monitors these external factors on behalf of her clients, analyzing how congressional legislation and new market trends will affect them on an individual level. This analysis then feeds into conversations with customers and, ultimately, into customer plans.

“We have a framework for how we approach planning. We approach each of them with executives to understand their situation, ”says Beverly. “We are proactive and have this conversation with our customers. Backdoor Roth, maybe the last year is an option, so we’re answering those questions. “

Keeping an eye on the latest interest rates and legislation can be interesting for some and a burden for others. People who lack the time or interest to create and adjust a financial plan – or just don’t want to take responsibility for it – might turn to a professional.

“It’s not that they’re not smart enough or that they can’t do it on their own, but one of the main benefits clients tell me about why they hire an advisor is they want to relax, ”says Kyle Moore, founder and financial planner at Quarry Hill Advisors. “Most people are going to decide if they can do it on their own at some point when the market takes a hit – it’s a question of whether they can handle it. With research, mathematics and analysis, human behavior becomes an important factor.


Louis R. Hancock