What’s Financial Planning

The longer answer

Financial planning is a comprehensive evaluation of your current and future financial state. It takes what is known today — what you earn, what you owe, what you own, what your benefits actually give you, how you are taxed — and uses it to project future cash flows, asset values and withdrawal plans.

The part that makes it planning rather than a series of separate decisions is this: every question, every number and every piece of analysis is considered in terms of how it affects, and is affected by, the whole of your financial and life situation. A choice about your 401(k) is also a choice about your tax bill. A choice about paying down a mortgage early is also a choice about your emergency reserve. Planning is what keeps those from being decided in isolation.

What you end up with is a written plan — a document, not a feeling — that says where you are, where you are trying to get to, and what to do about the gap.

What it covers

A plan does not have to cover everything at once. You and your advisor pick the areas that matter for your situation. Those areas typically include:

• Cash flow and debt: whether you are running a surplus or a deficit, what to do with the surplus, which debts to clear first, and how large a cash reserve you should keep.
• Retirement: how likely you are to reach financial independence, and if the projection falls short, which variables to change — working longer, saving more, spending less, taking more investment risk.
• Taxes: which accounts and which investments to hold where, so that you are not paying more tax than the law asks of you, now or later.
• Investments: an asset allocation matched to your goals and your tolerance for risk, plus what to do with employee stock options.
• Insurance and risk: your exposure to premature death, disability, property loss and long-term care — and whether the cost of insuring against each is worth paying.
• Employee benefits: whether you are actually taking maximum advantage of what your employer offers, or, as an owner, how to structure benefits for both business and personal goals.
• College savings: what post-secondary education is likely to cost and how to get there, including how it interacts with financial aid.
• Estate and incapacity: your exposure to estate taxes, and whether you have a will, powers of attorney and the right trusts in place.
• Business planning: for owners — starting, running or eventually exiting the business.

The full detail of each area is on our Services page.

How the process runs

Ours is six steps: a 15-minute phone call, a 60-minute discovery meeting, plan design and analysis, a plan delivery meeting, implementation and support, then an update meeting every six months with tax planning before you file. Each step is set out in full under our process.

If you would rather see the output before the process, we publish a complete sample financial plan, and sample Asset-Map reports for an educator, a physician, a single parent, a small business owner, a young family and a young professional.

Do I even need it?

Some honest signals that you do:

• You could not say, within a reasonable margin, whether you are on track to retire when you want to.
• You are saving, but you are not sure the money is in the right accounts, in the right order.
• Your income changed — a raise, a business, a second earner, a windfall — and nothing about your plan changed with it.
• You have a decision in front of you that is hard to reverse: a house, a business, an equity package, an inheritance, a divorce, a move.
• You have never seen your finances written down in one place.

And a reason people wrongly rule themselves out: the belief that planning is for people who already have money. It is not. It is most valuable before the big decisions get made, which is exactly when people have the least. No assets, no problem.