Comprehensive Financial Planning
If you look at the donut graph that I provided. A comprehensive plan will consist of such areas as the basic financial plan that outlines the fundamentals and foundation of your comprehensive financial plan, this is in addition to cash flow management, retirement planning, investment management, tax planning, insurance, estate planning, and charitable gifting. As you can see that is way more than just investment management and a quick retirement projection
The first component is to provide you what you expect a financial plan is and that is snapshot of how your financial situation stands as is today and that financial plan will include what you are accustomed to with. For Example, a projection of retirement dates, income in retirement based on spending goals and lifestyle changes up until retirement and throughout retirement, and a net worth statement. But like I said, this is just a snapshot in time and there are many different moving pieces within a financial plan that can determine how successful your financial plan can be.
Cash Flow Management
Cash flow management is simply understanding your cash flow and setting a budget. To do this I help you go through your various sources of income, comb through your earnings and deductions on your paystub, and help you to understand any discrepancies towards your spending you may have and help you to figure out a way to save more if you have a surplus of income or figure out areas to cut spending if debt is becoming an issue. Same thing goes for retirement, I help you to understand the amount of income you need for your lifestyle and guide you through an efficient way of accessing income from your portfolio that is sustainable and tax efficient.
Once there is an understanding of your cash flow and budget, we can start to work on the retirement planning portion of your Financial Plan. This will include areas where we can start saving more and looking at resources that will provide income towards your retirement. Resources that include Pensions, 401(k)s, 403(b)s, IRAs, and Social Security to name a few.
From there I can start introducing Investment management as an integral part of your financial plan and determine what your risk tolerance is to figure out a successful asset allocation with a goal of a potential rate of return that won’t send you into a panic every time the market goes down. In addition to providing an asset allocation for your portfolio, asset management includes benefits such as systematic rebalancing, asset location, and tax loss harvesting with a timely implementation of such strategies.
Then it’s on to tax planning, where just about every financial decision has some sort of tax implication and the goal here is to weigh the balance between paying and saving tax today versus deferring taxes until retirement with the overall goal being to minimize the overall effective tax rate over your lifetime. With that being said, you should always defer back to your CPA for the final decision but introducing your Financial Advisor to your CPA can help maximize implementing tax planning strategies, as CPAs tend to focus on saving you taxes in the current year versus over your lifetime and don’t always know the financial planning side of tax planning.
When we have established that your financial plan has a high probability of success based on your earning potential, cash flow projections, and projected rate of return, we then must step back a little bit and make sure those assets are protected against catastrophic events that could be detrimental to your plan. These events include accidents that occur within your house, car, boat, and other property you are liable for in addition to other serious issues regarding health, disability, long term care needs and death. All of these events can seriously impact one’s financial situation but are often times overlooked because they’re issues people don’t want to talk about or don’t believe will happen to them. Overall, it is my job to bring these issues front of mind and make sure the concern is addressed.
Now that we have focused on your financial plan having a high probability of success, and we have done our due diligence to best avoid a catastrophic loss, we can now shift gears towards estate planning and leaving a legacy to the proper heirs and beneficiaries. This includes working together with an attorney to properly draft estate plan documents such as wills, trusts, durable and health care power of attorneys, and a living will or updating your documents to reflect major life events such as a death or birth in the family.
Charitable Gift Planning
Finally, when you have a financial plan that meets your goals and has an outline for success, you may find that there is room to implement more gifts to charity beyond what you are already giving. We can work to implement giving strategies such as those that allow you to put money aside today, and take a tax deduction now, while the money grows and provides you with a way to give to charity during retirement when income may be less than your working years.