What Should go into a Financial Plan?

Over the years, I’ve had the opportunity to debate discuss with various clients and other advisors regarding the proper contents of a “comprehensive financial plan.” The responses run the gamut, even more than you might think.  For some, it’s a plan that addresses various types of insurable risks and an investment plan for retirement.  Others argue that it couldn’t be comprehensive without education and tax planning, too.  Still others tout their fully-comprehensive 10-point financial planning process.

I’ve come to the conclusion that it’s probably impossible to pin down exactly what a “comprehensive financial plan” includes, because it’s going to be different for each and every client. However, as amorphous as the concept of what a comprehensive plan is may be, I have a crystal-clear vision of what it is not.  A financial plan cannot be considered truly comprehensive if it focuses solely on the “math and money” topics listed above, regardless of how many of those it may address. Financial planning is life planning, and you cannot separate the two. So to ignore the aspects of a client’s life that can’t be easily quantified is to do them the ultimate disservice.  Further, a financial plan that addresses math-and-money issues before life issues can only be correct through luck, but a plan that creates math-and-money solutions through the lens of life issues will be right every time.

I’ve included some examples of both “Life Topics” and “Math & Money Topics” below. Your comprehensive financial plan should address all of the math-and-money topics that pertain to your situation (including the ones that I failed to list), and should be grounded in what you discovered about yourself and your goals through your investigation of the life topics.

Life Topics

  • Money History
  • Financial Organization & Control
  • Aspirations
  • Concerns
  • Appetite for Risk
  • Ideal Life vs. Current Life
  • Family Goals
  • Spirit/Value Goals
  • Creativity Goals
  • Community Goals
  • Environment/Place Goals
  • Health Goals
  • Prioritization of Desires

Math & Money Topics

  • Investments
    • Asset Allocation and Portfolio Design
    • Asset Management Programs
    • Diversification Strategies
    • Alternative Investments
    • Non-Traditional Investment Strategies
    • Investor Behavior Analysis
  • Insurance
    • Life Insurance Analysis and Design
    • Long-Term Care Analysis and Design
    • Disability Protection
    • Property and Casualty Insurance Analysis
    • Health Insurance Analysis
  • Financial Independence Planning
    • Traditional vs. Non-Traditional Retirement Planning
    • IRA Rollover and Distribution Planning
    • Income Projection and Analysis
    • Fixed Income Strategies
    • Qualified Plan Design and Analysis
  • Debt Management
    • Creditor Protection
    • Efficient Credit Management
  • Estate
    • Wealth Transfer Analysis and Tax Reduction Strategies
    • Charitable Giving
    • Trust Analysis
  • Education
    • Primary, Secondary and Higher Education Planning
    • Savings Vehicle Analysis and Strategy
    • Cost Projections
  • Income Protection
    • Income Replacement
    • Diversification of Income
  • Asset Protection
    • Point-by-Point Risk Analysis and Reduction Strategy
  • Tax
    • Income Tax Planning (State and Federal)
    • Tax-Advantaged Investing (Asset Location)
  • Business
    • Business Succession
    • Buy-Sell Arrangements
    • Non-Qualified Retirement Plans
    • Key Employee Retention
    • Business Risk Analysis and Reduction Strategy
    • Business Income to Personal Wealth Strategy
    • Benefit Plan Design
  • “Special Situations”
    • Divorce Planning
    • Mental or Physical Incapacity
  • Real Estate
    • Buy vs. Rent Analysis
    • Mortgage/Equity Planning
    • Multiple-Property Strategy
  • Cash Flow Planning
    • Spending Plan
    • Trade-Off Analysis
    • Large Purchase Impact
    • Optimal Credit Deployment
    • Additional Income Opportunity Analysis

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What Should go into a Financial Plan?

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