Certified Public Accountants & Business Advisors



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Often the first area that comes to mind with financial planning is investing. Although a sound investment strategy is one of the important aspects of financial planning, it should be considered as part of an overall plan. The Institute of Certified Financial Planners (ICFP) defines financial planning as follows:

Personal financial planning is the organization of an individual’s financial and personal data for the purpose of developing a strategic plan to constructively manage income, assets, and liabilities to meet near and long-term goals and objectives. Important to the success of the personal financial planning process is the monitoring and periodic review of the plan to assure that it continues to meet the individuals’ needs.

The financial planning process is generally divided into seven different functions:

1 Determine goals and objectives and identify resources and means to achieve them.
2 Gather relevant data.
3 Review and analyze data
4 Prepare preliminary analysis of current financial situation and reassess goals.
5 Present a report and make recommendations.
6 Implement or coordinate implementation of recommendations.
7 Monitor performance and update plan.

The focus of financial planning is on seven areas that include the following:

1 Retirement and financial independence planning - Much of the burden and risk of planning for retirement has shifted from employers to employees. Also the availability of funds under our social security system is subject to change. A review of your expected retirement needs, along with assets currently available, the amount of your savings, and the length of time to your desired date of retirement should be considered.
2 Integrating tax and financial planning - Careful consideration of income tax implications is necessary for decisions made during the financial planning process. Coordinating income tax planning concepts and issues with your financial planning goals and objectives should be implemented on an ongoing basis.
3 Estate planning - Estate planning is also an important part of one’s financial plan to assure care of loved ones as well as for the managing, administering and distribution of your assets. An up-to-date will is essential, along with the possible use of a living (revocable) trust, and a durable power of attorney. Part of this process should include a review of how your assets are titled, since the best estate and financial plans can be thwarted by improper titling of assets.
4 Risk management and insurance needs - Risk management and insurance planning calls for obtaining the appropriate amount of health, life, auto, homeowners, general liability, and long-term care insurance. The goal is to allocate premium dollars to reduce significant risk and exposures. This includes using the appropriate deductibles and, in some cases, deciding not to insure against a potential loss. However, one should never risk a large loss to save a small premium.
5 Cash management, budgeting, and debt management - Current expenditures can be reviewed and a budget prepared that would document modifications based on one’s goals. Included would be a review of the terms of all outstanding debt to investigate opportunities to refinance at more favorable terms. Providing an emergency fund for contingencies is important. This can be accomplished with additional savings and/or a home equity line of credit.
6 Education planning and income splitting - Education costs continue to increase at a higher rate than the rate of inflation. A review of the progress toward funding education should be completed along with investigating potential sources of financial aid.
7 Investment planning and asset allocation - An appropriate investment strategy can only be made after considering the other components to one’s financial plan. In this fast changing world of investing, there are many opportunities available today not previously available. A good example is the increased popularity of online investing. Keep in mind, however, that studies indicate that a proper and wise allocation of investments is the largest determinate of investment success. For most, this is more important than individual stock selection or being able to potentially time the ups and downs of the market. One must be sure to distinguish between investing and speculating.

Determining the direction and priority of your financial goals can be a difficult task. For example, your retirement date and lifestyle expectations will determine how much you will need to save for retirement and how you will want to invest those savings. The following are some questions you can ask yourself that could assist with the financial planning process:

Have I established attainable goals?
Have I made a review of my current financial status?
Do I have a personal budget?
Do I have a contingency plan?
Do I have an estate plan?
Is my homeowner and auto insurance coverage adequate?
Is my life insurance coverage adequate?
Do I have an investment strategy and have I recently reviewed the components of my investment portfolio?

We hope the above provides a good overview of the financial planning process. Our assistance can range from informal consultations regarding the above areas to a more detailed analysis and financial plan preparation and implementation.

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