What Should Be Included in a Financial Plan?

What goes into a financial plan?

At Toberman Becker Wealth, we put financial planning first. To many people, this may sound like a boilerplate statement leveraged for marketing purposes. After all, what financial advisor wouldn’t prioritize financial planning with their clients?

The truth is that many financial advisors, although well-meaning, view investing as the foundation of their service offering. They focus on creating a strategy for their clients’ portfolio, track returns, and zero in on the assets they manage as their primary concern.

Investing is a major part of financial planning. However, our Toberman Becker Wealth team puts an emphasis on creating and managing a comprehensive financial plan. Investing is one component of that plan, but it’s not the full picture.

Let’s dig into why we put financial planning first, and how it impacts the rest of your financial life.

Why We Put Planning First

Creating a financial plan helps us determine several things out of the gate that impact the future of your financial life:

• What your goals are.
• What progress you’ve made toward those goals already.
• How much risk you’re comfortable taking.
• What the best course of action is to bridge the gap between where you are now, and where you want to be.

Your comprehensive financial plan gets to the root of your values, helps you set meaningful goals, and builds a strategy that leaves no stone unturned. Your plan also helps you to assess your risk tolerance, cash flow, and the timeline you have until you reach your goals.

Wondering what goes into a financial plan? Let’s find out.

What’s In a Financial Plan?

In creating a financial plan, we’re building a model for your present and your future. To begin, we evaluate your goals and values. Understanding both short and long term goals is key to reverse engineering a strategy that allows you to check some of those “bucket list” goals off of your list while living comfortably in your day-to-day. Some goals we see come up frequently with clients are:

• Retiring by a certain age.
• Putting together a small business succession plan.
• Taking care of family members (such as aging parents).
• Purchasing a vacation home.
• Funding college education costs for your children.
• Becoming debt free.
• Investing outside of your small business to diversify your assets.

How Does the Bucket Strategy Work in a Financial Plan?

Once your goals are clear, we can create a cash flow plan based on the bucket strategy. This strategy involves breaking your cash flow needs into three buckets depending on your goals and retirement timeline:

• Short term. This bucket is intended to last you for 1-3 years.
• Mid-term. This bucket is 3-10 years.
• Long term. This bucket is 10+ years.

Each bucket can be invested in a way that aligns with the amount of risk you’re willing to take on to meet your goals. For example, in the short term you likely need a large amount of low-risk funds – and may even keep a bulk of your assets in cash for easy access. However, when you retire in 10+ years, you want to grow that nest egg more aggressively. So, you may have a different strategy for that particular “bucket”.

After your “bucket” strategy has been built, we can also model the future of your net worth statement to determine retirement income, liquidity, and to help make estate planning decisions. There’s also room here for a “gap” analysis. In other words, if your current lifestyle and spending patterns could put some of your bigger goals in jeopardy, we can evaluate what changes need to be made in order to bridge the gap between where you are currently and where you want to be.

Core Elements of A Comprehensive Financial Plan

Of course, your strategy doesn’t just involve the assets you currently have. A true comprehensive financial plan evaluates:

• Social Security. Leveraging Social Security is key to building a retirement income, and your plan will include a strategy for when to start taking your benefits.
• Retirement income and insurance. From determining how to take your Required Minimum Distributions, to analyzing your portfolio, to understanding when to enroll in Medicare, your financial plan will help you retire with confidence.
• Charitable giving. Your money is more than just a tool to benefit you – it can benefit others as well. We’ll look at your values and work toward making an impact and leaving your legacy.
• Tax planning. Through the process of creating a financial plan, we help you visualize and quantify the impact of using tax strategies in your plan that can reduce your tax burden during retirement.
• Estate planning. By making sure you have enough resources to meet your goals, you can embark on more advanced estate and gift planning strategies with the confidence that it will not impact your lifestyle.

And more.

Each year, we work with clients to remodel their financial plan and test it to ensure that we’re still on track to achieve their goals. We perform stress tests, and look to see if anything has changed in the past year that might shift what we’re working toward, or the financial decisions they’re making.

How Does a CERTIFIED FINANCIAL PLANNER™ Benefit Me?

A CERTIFIED FINANCIAL PLANNER™ (CFP®) is a financial advisor who has been trained and tested in the field of comprehensive financial planning. They are also required to complete ongoing continuing education to stay up to date in the practice of financial planning. They are there to both help you create an initial plan, and act as a trusted mentor to guide you through life’s many financial decisions.

From your initial meeting, to the development and implementation of your financial plan, your CFP® Professional will provide ongoing support, guidance and education. Want to learn more about how Toberman Becker Wealth’s financial planning strategies can benefit you? 

Reach out! We’d love to talk with you about your unique financial situation.