One thing I can say emphatically: In today’s economic and market environments, it is vital to have a proactive, documented financial plan. Why? A personalized plan can help your money work more efficiently and can help keep you on course to make smart decisions through ever-changing circumstances.
A financial plan coordinates and optimizes all the “moving parts” of your fiscal life. You’ll understand how one change affects another, which can help you make smarter, more informed decisions toward your long-term goals.
As in a business, if the sales team sets goals or makes changes without understanding the impact on manufacturing, problems are sure to arise. Similarly, if your returns slide, do you know how it will impact your retirement income or family’s inheritance? Do you readily know your overall financial bottom line?
Here are a few key elements to include in your financial planning process.
7 Ways a Financial Plan Can Help You in 2015
- Your Life Goals: To effectively plan for the future, you need to know what you want your money to do for you. Vacation home? Send your grandchildren to college? Finally take that round-the-world trip? Whatever your dreams, documenting them in a financial plan will help you create a targeted road map.
- Optimize Your Cash Flow: To protect your nest egg, it’s important to understand when your spending habits will force you to tap into your principal. By comprehensively analyzing your current and future assets and liabilities, income and expenses, your advisor can help you project when these expenses will tap into your base. Many clients find this knowledge helps them make smarter buying decisions today to help keep their principal intact for tomorrow.
- Streamline Your Investments: Take stock of your current investments and allocations, then look for opportunities to reduce risk, increase returns, and minimize your investment-related taxes. We find many of our prospective clients could likely achieve similar returns with a lot less risk and tax liability.
- Plan for Enough Retirement Income: Your plan should set a strategy for your assets to last until you are 100 years old. We’re all living longer, and the last thing you want to worry about in retirement is going back to work.
- Minimize Your Taxes: Tax planning is a significant opportunity for many investors and an area most overlook. A custom-tailored tax-minimization plan should cover your investments, business and personal returns, and upcoming tax-law changes.
- Protect Your Wealth: Part of reducing risk and preserving your wealth is having the right insurance. Your CFP® can help you conduct a thorough analysis, including life, health, asset protection, and for business owners, key-person insurance and a gap analysis to highlight any holes between your personal and business affairs.
- Successful and Stress-Free Wealth Transfer: Family wealth transfer may not be an emotionally desirable topic, but those who create and annually update their wishes feel confident, knowing their plans are current, tax efficient, and set up to be hassle free for their family. An effective plan will also help ensure the total value of your estate is maximized and that your assets are managed and dispersed as you desire.
If you don’t have a plan, hopefully now you see its value. In creating your family’s personal financial plan and then using it for ongoing adjustments, you can identify opportunities to help your hard-earned money work more efficiently.
We believe financial planning is one of the secrets to effective wealth management, and falls in line with our mission to help our clients plan, build, and preserve their wealth.