There are a lot of misconceptions about financial planning – and more and more often the word “holistic” is being tacked on to this process – a meaningless and confusing addition in my mind. Done properly, financial planning has always been about “the whole person” and “the whole family” and about all of those things that are important to the client. It really isn’t financial planning when done properly since finances are not a goal but rather a means – finances are an asset to be used to achive important goals in people’s lives. So here is my take on the 7 parts of “financial planning”.
What gets you up in the morning?
For what are you striving in life?
What excites you about your future plans?
How do you see your personal or business legacy?
What is important in your life today?
Cash Flow Management
Sources, reliability and expected duration of current and future income
Taxation of current and future income
Expenses review and analysis
Includes any Education funding requirements
Income tax planning – personal, investment and business sources of income
Debt Management and Net Worth Enhancement
Good Debt versus Bad Debt
Analysis of Debt amounts, repayments, interest rates and purpose
Restructuring opportunities for enhancing Net Worth growth
Net Worth targets
Non-retirement financial goals and objectives (education, asset acquisition, travel, etc.)
Funding of goals from surplus or designated cash flow
Includes all assets other than personal effects and non-realisable collectables, antiques and jewelry
Individual Risk Tolerance Profiles
Full investment analysis and review including purpose, goals and priority
Targeted holdings and transition plans as appropriate
Tax efficiency and effectiveness
Includes business review from investment perspective including eventual disposition plans
Survivor income and bequest planning
Tax planning for your estate and legacy
Charitable bequests (if applicable)
Special needs bequests (if applicable)
Current sources of income, duration, taxation and indexing
Expected sources of income, duration, taxation and indexing
Lifestyle objectives – 3 stages of retirement – lifetime income requirement
Tax efficiency and effectiveness of income
Protection of lifetime income from erosion by inflation
Each client has different priorities and it isn’t my job as a planner to tell them what to do or in what sequence things should be done, with one exception. Without Life Planning be done first, the rest is just a bunch of meaningless numbers with no importance or urgency attached – and also a waste of everyone’s time!