The first step toward long-term financial stability and living the life you’ve always wanted to live is to create a thorough financial plan. But what exactly does a comprehensive financial plan look like?
To answer that question, we developed this article to offer a behind-the-scenes look at a sample financial plan. Using fictional clients (George and Martha Washington), we’ll analyze key components of their current financial landscape, from understanding their background and goals to doing a thorough analysis of their income and expenses to providing recommendations moving forward.
By looking through George and Martha’s sample plan, you get to take a peek inside the inner workings of a financial analysis followed by a well-planned strategy for moving forward.
Let’s get started!
What’s Included in a Financial Plan?
To start, you might be wondering about the parts that make up a comprehensive plan. Financial plans often cover a wide range of issues and objectives, including retirement income planning and tax planning.
At Clear Insight Wealth Management, we start by helping our clients define the elements that must be in place for them to live their ideal life. Once we have a clear picture of the life they have always wanted to live, we help them define their financial goals and work with them to build the financial infrastructure to live that life.
The result is an easy-to-follow but effective road map to guide you toward financial freedom.
Take a Look at a Sample Financial Plan
Using our fictional clients, we’ve developed a sample financial plan that reflects our planning process. The plan analyzes all aspects of George and Martha’s financial life including their background and goals, their current financial profile, and customized recommendations based on their situation.
1. Client background and goals
George is a Colonel in the army and he plans to transition out of the military in 2027. He is fulfilled by serving others and would like the next career phase to be about his passion for serving others even if that means making less than he earns now. Once their kids got older, Martha co-founded a government contracting firm. She is proud of the business she built but is ready to have more free time to spend with her family, friends, and giving back to the community through volunteer work. Ideally, they would like to be financially independent in six years so that work becomes optional.
The obstacles they think may prevent them from living this life include:
- They pay a lot of income taxes now and worry that when George transitions out of the military, their income taxes will only increase.
- They aren’t sure that they can continue to live the life they enjoy while George begins making less pursuing his passion.
- In six years when work becomes optional, what is the best way to fund their lifestyle? They will be under 59½ and don’t want to have to pay the withdrawal penalty on retirement withdrawals.
- They have already accumulated significant assets and are concerned that their assets may exceed the estate tax exclusion by the end of their life. They would like to leave their kids a tax-friendly estate.
- Charitable giving is an essential element to life satisfaction. Will they be able to give as much as they do now?
2. Aligning the investment strategy with the client’s goals
In addition to considering your risk profile, time horizon, your investment experience, and the current market conditions, Clear Insight will help you invest with intention. For George and Martha, that means increasing their contributions to the retirement accounts so that they can make work optional at 52.
George and Martha were fortunate to buy Nvidia stock several years ago. But now it has a 50% weight in their non-retirement account and a 33% weight in their entire portfolio. Concentrated positions create risk. Through tax-loss harvesting, an options strategy and switching to gifting shares of Nvidia instead of making cash gifts to charities, we not only reduce the risk but we help them avoid capital gains tax as we align their investment strategy with their goals.
3. Analysis of your current financial situation
At this point, we take a deeper look at your complete financial profile. We do a thorough analysis of your income, savings, current investment growth rate, your pension, Social Security, assets, and insurance. Tax planning is one of the most impactful parts of every financial strategy. Clear Insight not only works to reduce income taxes now but implements strategies today to avoid a tax burden in retirement. We use all this information to make recommendations based on your individual financial situation moving forward. The sample pages below offer a glimpse into a portion of this analysis:
4. Recommendations
Finally, based on the thorough analysis we conducted, we work with you to implement the recommendations so you can live the life you want to live. As regulations change and life happens, Clear Insight will be there to guide you every step of the way.
The Bottom Line
Creating a thorough financial plan is a team effort that requires giving your particular situation and objectives significant thought. Even while this sample plan offers a sound framework, it’s important to keep in mind that each person’s financial journey is unique.
By comprehending the key elements outlined in this article, you can gain important insights into building your own financial plan. Remember, seeking guidance from a qualified financial advisor can help you customize your plan to your particular needs and goals, essentially improving your pursuit of building the wealth you need to live your best life.