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What is a Financial Plan Anyway?

Essential Components to a Financial Plan

You hear all the time how important it is to have a financial plan. But has anyone ever explained to what exactly financial plan is?

A financial plan at it's simplest is a roadmap to reach your goals. Yes, this includes financial goals but it also includes your life goals as money is often the primary vehicle to attain the lifestyle you desire.

A financial plan takes into consideration a whole slew of personal and financial information, which is typically collected and assessed during the planning process:

Goals & Objectives

These should be listed by priority as specifically as possible. Ideally, they are also measurable, reasonable and capable of planning.

Income Tax Planning

Tax returns should be examined to determine if you are maximizing tax-saving possibilities consistent with the planning objectives.

Balance Sheet

A balance sheet or “Statement of Financial Position” should be created, showing your net worth by listing all assets and liabilities. This should be periodically updated to track progress towards overall goals and to identify changes in your financial situation that need attention.

Issues & Problems

Issues/problems consist of observations regarding the strengths and weaknesses of your current situation as well as risks you face.

Risk Management & Insurance

A sudden unexpected event can derail even the most detailed plan unless you have anticipated and planned for catastrophic events. Insurance products are useful in managing these risks. You should evaluate your life, disability, liability/umbrella and long-term care insurance.

Retirement, Education & Special Needs

Consideration must be given to retirement, education, or any other special needs (e.g., physically or mentally incapacitated dependents or divorce settlements). Financial projections should be prepared for these needs, along with funding strategies.

Cash Flow Statement

Preparation of a cash flow statement will show income from all sources, as well as expenses that occur on a regular or recurring basis. This should be periodically updated to track progress towards overall goals and to identify changes in your financial situation that need attention.

Investment Planning

An analysis of your investments should be completed to determine if the portfolio’s earnings, growth and diversification are consistent with your objectives and risk tolerance.

Estate Planning

Your financial plan should include a review of your lifetime gifts and final transfer of assets to reduce or eliminate your gifts and estate tax exposure.


Assumptions include inflation rates, rate of return on investments, tax bracket, years of work remaining, and life expectancy. These should be reviewed periodically against your actual financial plan and adjustments should be made accordingly.


All final (and proposed) recommendations should be in writing, stating the assumptions upon which they are based, projected benefits and potential problems.

Implementation of Plan

The plan implementation section should delineate the individuals responsible for implementing each identified task, whether it be you, your financial planner, accountant, attorney or some other expert.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.   Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation

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