A comprehensive financial plan is only possible with a clear and practical financial goal, thorough understanding of the current financial status, and comprehension of all required knowledge and expertise to facilitate the forming of a good financial plan.
Knowing your financial goal as well as your current financial status is where your financial plan starts, as it is ultimately a process of working out a feasible plan to reach your goal on the basis of the current situation.
When it comes down to the financial plan itself, it is constituted of several points roughly including:
- Current budget and cash flow– an overview of your monthly income and expenses, and an analysis of current spending and how spending patterns may change in the future;
- Investments–organization of your investment accounts; understanding of risk tolerance and comfort; buildup of emergency funds, savings for intermediate-term goals (such as down payment on a home), review of non-retirement accounts and more;
- Retirement savings– how much you’ve saved for retirement and in which type of accounts; and making sure you have enough spending money once retirement begins;
- Educational and family savings– education savings for children, grandchildren and, if you may be supporting an older family member, funds for family support;
- Risk management– life insurance for your family and insurance for property, such as home and car insurance; and protection planning against other “what-ifs” such as a disability or long-term care event;
- Estate planning– wills, plans for disposition of your assets, powers of attorney for both your health and your finances if you should become incapacitated.
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