There are six key components that every financial plan must have, financial goals, retirement plan, estate plan, insurance, debt management and assistance. Although each of these components are in itself complete the financial plan will not be complete or effective without each components.
Financial goals
A Financial plan without a goal is not plan. Like with any journey you have to decide where you want to go before you start the journey. Therefore, to start the financial planning process you must decide where you want to be financially. That means deciding how much money you need to be financially free.
After deciding how much you need to be financially free then set financials goals that will help you on the journey to financial freedom. There are three major goals that will help you along the journey long-term, intermediate, and short term.
Retirements Planning
Building a retirement plan might sound very complicated but with right information you can create a plan that is right for you. Retirement plan is very important part of the financial plan.
Retirement Planning will include 401k, 403b, etc., Roth IRA’s, Annuities., to name a few. There is other investment that can be included in retirement planning but be careful when planning.
Estate Planning
Estate planning is making a plan in advance that will manage the individual assets in the event of incapacitation or death. This will include wills, both last testament and living, power of attorney and trust.
Insurance
Insurance provides coverage against accident, injury or loss. There are five basis insurance everyone should have.
- Health Insurance
- Car Insurance
- Homeowners/Renters
- Life Insurance
- Disability
Insurance forms one of the key component of the financial planning since it protects your assets.
Debt Management
Managing debt will move you along the financial freedom journey quickly. Having a plan to reduce debt as a part of the financial plan is key. Reducing or eliminating debt will then free up money.
Assistance to others
Taking care of others if not included in the financial plan will put a strain on your finances. Therefore, it is important to include minor children-college fund, caring for elderly, and charities as a part of the financial plan.
Building a financial plan may sound complicated, but with the help of a financial professional you can create a plan that is right for you. If you have been procrastinating about any of these component now is the time to begin with a discovery call.
2 Comments
Starting with your financial goals is where I’m at. Thanks for sharing this reference point. A lot of times we don’t sit down and plan out our finances.
I am glad that this was helpful.