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Personal Financial Planning

What is Personal Financial Planning?
What subjects are addressed by Personal Financial Planning?
What is the Financial Planning Process?
What are your (the client's) basic financial goals?
What are your (the client's) more detailed financial concerns?

What is Personal Financial Planning?

A few definitions…

  • Personal financial planning is a process of developing and coordinating the implementation of a flexible plan to use an individual’s available financial resources to achieve specific financial goals.
  • Financial planning is the process of providing advice and assistance to a client for the purpose of achieving the client’s financial goals.
  • Personal financial planning is the organization of an individual’s financial and personal data for the purpose of developing a strategic plan to constructively manage income, assets, and liabilities to meet near- and long-term goals and objectives. Important to the success of the personal financial planning process is the monitoring and periodic review of the plan to assure that it continues to meet individual needs.
  • Personal financial planning is the continuing process of using your resources to achieve your personal and financial goals
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What Subjects Are Addressed by Personal Financial Planning?

  • Cash Management and Planning
  • Risk Management and Insurance
  • Education Planning and Income Shifting/Splitting
  • Retirement and Financial Independence Planning
  • Estate Planning
  • Investment Planning and Asset Allocation
  • Tax Planning
  • Implementation and Monitoring
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What is the Financial Planning Process?

Our financial planning process is driven by your objectives. We do not use a “canned” financial planning package that generates basically the same report for every client. Instead, our financial plans are highly-customized and tailored to your individual objectives. We create, implement and maintain your plan with you by means of a five phase process. First, we assist you in evaluating, refining and documenting your goals. Second, we help you to take stock of your current financial position and your anticipated financial position. Third, we draft your financial plan, revising it as needed until you are satisfied with it. Fourth, we help you to implement your plan. Fifth, on an ongoing basis we help you to monitor your plan.

Phase One: YOUR GOALS drive the process.

We start with a goals questionnaire that you fill out. This gives us an initial insight into what your goals are. We take the completed questionnaire and use it to create a Goals Meeting Agenda. This agenda summarizes what we learned from your completed questionnaire and adds questions and issues we think should be raised and resolved. Usually this takes one meeting, but in cases where the goals are very detailed or there are goal differences between spouses, it may take more. Once we have a clear understanding of your goals, we prepare a Written Goals Report. This report serves two important functions. First, it ensures that we (our firm and you) are clear on your objectives. Second, it provides a reference against which we can compare any differing options or contentious points, thus allowing us to help you make good decisions that are in context with your goals.

Phase Two: We address your financial position.

This is where many planners start the process: by looking at your investment statements, assets and liabilities, etc. This phase is indispensable, but as you have just read, we prefer to start with your objectives. Once we have issued your Written Goals Report, we prepare an information request letter. In this letter, we ask you to provide to us all the documents we need to assess your financial position and ultimately to prepare your financial plan. These documents could include:

  • Investment and bank account statements
  • Retirement account statements
  • Personal loan and credit balances
  • Values and loan balances on real estate, vehicles, etc…
  • Home inventory items and values
  • Homeowners and automobile policies
  • Life insurance, disability and health insurance policies
  • Estate documents
  • Pay stubs
  • Various other items…

From our review of this information we produce two things: 1) a statement of financial position and 2) written observations. The first item is basically a personal balance sheet. The second item is qualitative observations on items that are not addressed in an accounting balance sheet, e.g., the adequacy of your insurance policies. These two reports are incorporated into your final financial plan.

Phase Three: We draft your Personal Financial Plan

A financial plan is a road map that charts how to get from where you are to where you want to be. The plan takes into account quantitative and qualitative factors. We prepare financial projections to address issues such as:

  • How much do I need to save each month to fund my retirement nest egg?
  • How much do I need to have set aside when I retire?

We provide qualitative review to answer questions such as:

  • Is my life insurance coverage adequate?
  • Does my homeowner’s policy cover the special things in my house?

Your Personal Financial Plan will contain the results of the calculations we perform, and observations and recommendations section, and most importantly an Action Checklist.

Phase Four: Implementing the Plan

The Action Checklist is the key to phase four. This is the list of items you must execute in order to put your plan into action. It contains items such as:

  • Changes to insurance coverage you need to make.
  • Savings amounts and methods you need to begin.
  • Budgetary and lifestyle changes you have agreed you need to undertake.

As mentioned above, the plan is just a map. It does nothing unless you undertake the journey.

Phase Five: Monitoring the Plan

A map become fully utilized when you use it to monitor the progress of your journey – to make sure you are on course. Life is a fluid process. As such, your goals will change, your resources will change, and thus your plan will need to change. We recommend an annual review of your plan, and changes to the plan whenever appropriate and cost-effective.

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What Are Your Basic Financial Goals?

Some possible short-term goals…

  • Debt reduction
  • Establishing an emergency cash reserve
  • Starting an investment plan
  • Purchasing a home
  • Reviewing insurance coverage

Some possible long-term goals…

  • Funding your child(ren)’s college education
  • Accumulating retirement funds
  • Planning for the orderly transfer of your business to the next generation
  • Providing for dependents and heirs
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What Are Your More Detailed Financial Concerns?

Some Ideas…

Cash Management and Planning:

  • Do I need a budget?
  • How much do I need in ready cash reserves

Risk Management and Insurance:

  • Do I have enough life insurance? Is it the right kind?
  • Do I need disability insurance?
  • How can I better protect my assets?
  • Do I have the right coverage under my homeowner’s / auto owner’s and umbrella policies?

Education Planning and Income Shifting/Splitting

  • I need to plan how to pay for my children’s education
  • Should I accumulate assets in my name or theirs?

Retirement and Financial Independence Planning

  • Can I afford to retire when I want to?
  • How much will I need to fund retirement?
  • What about long-term health care?

Estate Planning

  • Do I have an estate tax problem?
  • How do I leave my assets to the people I want?
  • How do I document who will care for my children?

Investment Planning

  • Once I have created a financial plan, how should I invest my money to meet my goals?
  • What should I have in mutual funds as opposed to individual stocks?
  • What is a reasonable rate of return to expect?

Tax Planning

  • How can I lower my income tax bill?
  • Can we account for income taxes in all my financial planning choices?
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