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Financial Plan

Reviewed by Sujaini | Updated on Sep 30, 2020

Catalogue

Understanding Financial Plan

A financial plan is described as a comprehensive statement of the long-term security and well-being goals of an individual, as well as a detailed savings and investment strategy to achieve those goals.

A financial plan can be developed independently or with the help of a professional financial planner. In either case, it starts with a thorough assessment of the current and future financial state of the individual.

Breaking Down Financial Plan

Irrespective of doing it on your own or with a financial planner, the first step in making a financial plan is to bring together a lot of pieces of paper or, more often these days, to cut and paste numbers from different web-based accounts into a folder or spreadsheet.

The steps involved in creating a financial plan may be completed by an individual or a couple:

  1. Calculating net worth
  2. Determining cash flow
  3. Considering your priorities

Key Takeaways

  1. A financial plan outlines the long-term goals of a person and develops a strategy to achieve them.

  2. The plan should be highly individualised so that the personal and family condition of the participant is addressed along with the factors, such as risk tolerance and future expectations.

  3. The strategy starts with the calculation of the current net worth and cash flow of the person.

Special Considerations of a Financial Plan

There is no fixed framework for financial plans. A certified financial planner will build a plan that suits your goals and needs. It can encourage you to make short-term adjustments that will help ensure a smooth transition through the financial phases of life.

The following factors should be considered and revised as necessary:

  1. Retirement strategy
  2. A comprehensive risk management plan
  3. Long-term investment plan
  4. Tax reduction strategy
  5. Estate plan

No one can tell you how these targets can be prioritised. Nevertheless, a professional financial advisor will help you pick a comprehensive savings plan and different assets to help you check them off one by one.

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