Eric Sachetta
Navigating the uncertainties of life can be challenging, but with comprehensive financial planning, you're not just preparing for the unknown—you're taking steps to pursue your goals no matter what the future holds. Whether it's addressing the financial impact of a sudden illness or injury, or ensuring your child can attend their dream college without financial aid, a well-crafted financial plan offers both security and options. It allows you to respond to unplanned events without compromising your long-term goals.
Working closely with your financial advisors can simplify the process and guide your decision making. A solid plan provides flexibility; as your life evolves, your plan can adapt as well. That means your financial strategies remain aligned with your changing needs and priorities, helping you to manage life's challenges with confidence and foresight.
SEVEN ELEMENTS OF COMPREHENSIVE FINANCIAL PLANNING
- Clearly defined financial goals.
Beyond a general objective of “maximizing wealth,” everyone has their own individual financial goals. Do you want to retire early and move to the beach? Be able to put your kids through college and graduate school? Provide ongoing financial support to a favorite charity? Afford luxury vacations every year? Prioritize savings to finance your long-term care ? These kinds of practical and emotional financial goals will shape the way you approach financial planning, so think about them before you meet with your advisors.
- Budgeting and cash flow analysis.
This piece of your financial plan is about making sure you know how your money moves around on a day-to-day basis. Some people are diligent about managing their personal or household budget themselves; others prefer to have their financial advisors help them budget, especially if they’re already struggling with cash flow. Creating a system that allows you to track your earnings and expenses every month is an important element of keeping your larger financial plans on track.
- Retirement planning
How you approach retirement planning is going to depend somewhat on your current age and your personal objectives for your retirement. Points you might discuss with your advisors include things like: At what age do you want to retire? At what age will you start taking Social Security? If you’re married, what are your spouse’s retirement plans? Where do you want to live in retirement, and what you can anticipate about the cost of living and tax burdens there? Do you expect your tax bracket to be lower or higher in retirement than it is now? (Either way, that might affect how you use tax-deferred vs. tax-exempt retirement accounts.)
- Insurance planning
Insurance planning is all about striking a careful balance: You want to protect the people and assets that matter most, but you don’t want to overpay for insurance or pay for coverage you’re unlikely to need. That’s why insurance planning needs to be revisited as you move through different stages of life or as your financial circumstances change.
For example, new parents often buy life insurance for the first time, or increase their existing coverage after adding more children to the family. Once the kids are self-sufficient adults, parents may elect to let life insurance lapse. If you’re the primary breadwinner in your family or are self-employed, you might buy individual disability insurance to replace your salary if you’re disabled and unable to work. That said, this kind of coverage might not be worth the expense if those aren’t your circumstances.
Health insurance, car insurance, home insurance, long-term care insurance, disability insurance and even pet insurance are all topics that you might need to discuss with your financial planning advisors.
- Investment planning
What's the best way to grow your wealth without taking on more risk than you’re comfortable with or able to absorb? Working with advisors on investment planning helps you determine how much you can afford invest, and design a strategy to allocate those dollars. Risk tolerance, financial stability and your age are all significant factors that can shape how you craft your investment plan. For example, a young person may be less risk averse than someone closer to retirement who may prefer to have more stable investments in their portfolio.
- Estate planning
Estate planning is for everyone. It’s not something to put off until you’re near the end of your life. Even young adults should take care of some basic estate planning tasks, including creating a health care proxy and financial power of attorney. Estate planning strategies will also help to ensure your wishes are followed and your assets are passed to your chosen beneficiaries in a way that minimizes estate taxes.
Estate planning is also imperative for parents of dependent children. In the event of your passing or incapacitation, naming guardians in your will and establishing financial support for the dependent children would be tremendously helpful for your survivors.
- Tax planning
Tax planning touches all the other pieces of your financial plan. Tax implications should be part of the conversation when you’re talking to your advisors about any major financial decisions: buying or selling investments, retirement planning strategies, transferring wealth to your heirs, etc. That said, yearly tax planning is also of course part of a healthy financial plan. Ideally you’ll be so familiar with your tax obligations that there are no surprises when it’s time to file your tax return.
WHAT ELSE MIGHT BE PART OF YOUR COMPREHENSIVE FINANCIAL PLAN?
Bear in mind that this isn’t an exhaustive list, but merely a starting point for creating a financial plan that’s tailored to your specific needs and stage of life. Parents and grandparents often want to incorporate education planning into their financial plans, for example; charitable giving and succession planning for business owners may also be part of the financial planning process.
READY TO DISCUSS YOUR COMPREHENSIVE FINANCIAL PLAN?
From young professionals getting started with retirement planning, to new parents who want to protect their growing families, and retirees who want to find the most tax-advantaged way to maximize their required minimum distribution, it’s always a good time to revisit your financial plans. Sachetta’s advisors are here to help you achieve the sense of peace and reassurance that comes with knowing you’ve put all the most important financial plans in place. No matter where you are in your financial planning process, we’re happy to talk more about how Sachetta’s advisors might be able to lighten the load and maximize your wealth. Contact us today!
Eric Sachetta, ChFC®, CFP®, is a Certified Financial Planner™ practitioner and focuses on financial planning and client relationship management. Eric believes that estate planning provides an opportunity to “look at all things that you value, see how they fit together, and make choices to balance everything and to maximize the things you want to do.”