What Is a Comprehensive Financial Plan? And Why Do You Need One?

​According to a 2013 study by the Certified Financial Planner Board of Standards and the Consumer Federation of America, only 19 percent of Americans could be categorized as Comprehensive Planners, meaning they have a defined plan that addresses all areas of their financial lives. The remaining 81 percent may plan for certain goals, like retirement or college, or may not engage in any financial planning.1
 
Which group do you belong to? Any type of financial planning is better than none. Even a loose household budget or ballpark retirement savings estimate is more effective than not planning. However, you may benefit from having a comprehensive financial plan.

While you may have specific goals, like retirement, for example, those goals are often intertwined with other objectives and obligations. Your retirement savings impacts your ability to save for your child’s college. Your investment strategy could impact your estate planning. Your finances are all interconnected. A comprehensive financial plan helps you see those connections and make informed decisions.
 
What should be included in your comprehensive financial plan? It may be different for each person, but here are some common elements found in many comprehensive plans. If you don’t have a comprehensive strategy, now may be the time to develop one. Below are a few elements you may want to include in yours:

Objectives and Goals
Before you can develop a strategy, you need to know where you want to go. You wouldn’t plan a road trip without a destination in mind. The same should be true of your financial planning efforts.
 
Start by establishing your goals and objectives with regard to retirement, college savings, risk management and even your legacy after you pass away. You can then use these objectives to guide your actions and decision-making going forward.

Cash Flow Management
Much of your strategy to reach your goals will likely be powered by the cash flow you generate through your career, business or other earnings. In your comprehensive plan, you should include a budget that maximizes the cash flow you have available after you pay expenses. Then you should use your goals and objectives to decide whether to allocate that cash flow toward retirement, college savings, debt reduction or other goals.

Investment Planning
Investing will likely play a critical role in many of your major financial goals. You need growth to accumulate assets for things like college and retirement. Nearly any type of investment brings some level of risk, and not all forms of risk are appropriate for every investor. Your investment management strategy should outline the types of investments that best suit your goals and needs.

Retirement Planning
Retirement is the most significant financial goal for most Americans. If you retire in your 60s, it’s possible that you may need to fund more than 30 years’ worth of expenses with distributions from your savings and investments.
 
Do you know what your savings target is? Do you know if your target is accurate? Do you know how much you need to save each month to hit your target? Or which vehicles are the best to use? The retirement section of your comprehensive plan should answer those questions and also address how your retirement savings efforts impact other goals.

Estate Planning
While it may not be pleasant to think about, at some point you will pass away. When you do, you will leave some kind of legacy to your loved ones. Will it be a legacy that leaves them in a comfortable financial position? Or will your death create significant financial challenges for those who are closest to you?
 
Estate planning is about more than just developing a will. It’s about defining your legacy and creating protections for your loved ones after you pass away. It’s a critical planning component for anyone with dependents or a desire to care for their loved ones.
 
Ready to develop your comprehensive financial plan? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you identify your needs and goals, and then develop a strategy. Let’s connect soon and start the conversation.


1http://www.cfp.net/docs/public-policy/2013-fin-planning-profiles-of-amer-households.pdf?sfvrsn=2

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