The 7 parts of Financial Planning

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”.

Life 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

Investment Management
 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

Risk Management
 Lifestyle protection
 Asset protection
 Cash-flow protection
 Retirement protection

Estate Planning
 Legacy planning
 Survivor income and bequest planning
 Tax planning for your estate and legacy
 Charitable bequests (if applicable)
 Special needs bequests (if applicable)

Retirement Planning
 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!

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