While there is no specific template for a financial plan, most licensed professionals include knowledge and considerations of the client's future life goals, future wealth transfer plans and future expense levels. Extrapolated asset values determine whether the client has sufficient funds to meet future needs. A good financial plan can alert an investor to changes that must be made to ensure a smooth transition through life's financial phases, such as decreasing spending or changing asset allocation. Financial plans should also be fluid, with occasional updates when financial changes occur.
A financial plan is based on an individual’s or a family’s clearly defined financial goals, including funding a college education for the children, buying a larger home, starting a business, retiring on time or leaving a legacy. Financial goals should be quantified and set to milestones for tracking.
A snapshot of assets and liabilities serves as a benchmark for measuring progress towards financial goals.
An income and spending plan determines how much can be set aside for debt repayment, savings and investing each month.
The plan should include a strategy for achieving retirement independent of other financial priorities. The plan should include a strategy for accumulating the required retirement capital and its planned lifetime distribution.
Identify all risk exposures and provide the necessary coverage to protect the family and its assets against financial loss. The risk management plan includes a full review of life and disability insurance, personal liability coverage, critical illnesses, medical insurance coverage, property and casualty coverage, and catastrophic coverage.
Include a customized asset allocation strategy based on specific investment objectives and a risk profile. This investment plan sets guidelines for selecting, buying and selling investments and establishing benchmarks for performance review.
Identify ways to minimize taxes on personal income to the extent permissible by the tax code. The strategy should include identification of tax-favored investment vehicles that can reduce taxation of investment income.
Create arrangements for the preservation and distribution of assets with attention to minimizing settlement costs and taxes. Review and update estate panning instruments, such as wills, inter-vivos trusts, power of attorney, digital assets distribution and proper nominations of life insurances and EPF.