tax planning

Elements of a Financial Plan - Part 2

In part one of this series (Elements of a Financial Plan - Part 1) I illustrated the importance of having a comprehensive plan. A good financial plan will attempt to “cover all of the bases” and not leave your financial future to chance or risk. In this post I will go over the importance of tax, retirement and estate planning.

Each and every financial planning element is contingent on one another, however some more than others. In example of how critical these elements are take retirement planning for instance. The success of a retirement plan depends on the right savings levels, portfolio allocation and risk management. Ignoring a element of a comprehensive financial plan could have a severe impact on your ability to reach your goals.

Tax Planning

As I mentioned in part one, tax planning is a fun one! Despite my lack of enthusiasm for tax planning and analysis, if it’s done correctly it can save a client and their family a lot of money. A comprehensive financial plan should consider income, property, transaction and estate taxes.

Due to the complexity of our tax code there is no doubt that many of us miss opportunities to save money every year. A comprehensive financial plan should anticipate when taxes will have to be paid and utilize knowledge of the tax laws to reduce the impact on a client’s bottom line.

Retirement Planning

If there is one part of a financial plan that is most contingent on the other elements is the retirement plan. Retirement plans are affected by your financial situation, savings and investment rate, the performance of the capital markets, the economy and risk management effectiveness to name a few.

If retirement planning recommendations such as, increasing savings, reducing unnecessary spending or creating a portfolio with the proper allocation your desired standard of living during retirement might become unattainable. This is why it is so important to start a retirement plan early and maintain the discipline needed to properly carry it out.

Estate Planning

The last financial planning element, and probably the least known, is estate planning. During life we usually accumulate various assets. These assets can include cash, real estate, investments and art to name a few. Upon passing, the laws of the State will govern the distribution of assets in the absence of the proper estate planning documents. These documents includes wills, trusts, powers of attorney and other legal instruments.

Estate planning seeks to reduce the confusion of distributing assets upon the passing of a loved one. In addition it also aims to minimize any taxes that could be levied on the estate. A comprehensive financial plan should continually revise the estate plan in order to remain relevant.

I hope this article helps you understand the comprehensive financial plan elements; tax, retirement and estate planning. In order to obtain your life’s goals be sure that you cover all of the bases. Overlooking a aspect of the financial process could impact your ability to maintain your desired standard of living.

Elements of a Financial Plan - Part 1

There are many different situations and events that can effect our financial lives. The most common events are the small financial decisions that we make everyday. In addition, these small financial decisions that have the greatest impact on our financial future.

In order to achieve financial freedom or at least financial security many of us should have a comprehensive financial plan. Comprehensive financial plans seek to “cover all of the bases”; meaning a good majority of financial planning factors have been considered. Absent of any special needs or situations a financial plan should include an analysis and recommendations concerning your current financial position, risk management/ insurance, investments, tax planning, retirement and estate planning.

Current Financial Position

The first element of a comprehensive financial plan is the analysis that determines your current financial situation. This step involves gathering a bunch of data consisting of bank account statements, insurance policies, brokerage account statements, estate planning documents, tax returns and any additional financial data you might have available. The information found in these documents will be used to create a income statement and the statement of net worth or statement of financial position.

In addition a Financial Planner should also prepare a “status quo” retirement outlook and conduct a strengths, weaknesses, opportunities and threats analysis or SWOT analysis. This objective of this study is to determine the gaps between your goals and objectives and current financial situation.

Risk Management and Insurance

One of the most common gaps uncovered in the financial planning process is a lack of adequate insurance coverage. This is to be expected due to the fact that nobody likes to pay for insurance. Regardless, insurance is one of the most important elements of an comprehensive financial plan. A rational person could save up a few million dollars and think they have achieved financial freedom, when an event that no one expected occurs.

There are many examples of incidents that could easily wipe out millions of dollars worth of savings. This is why its so important to protect the assets you have and ensure they are protected from life’s negative and unpredictable events.


Investments are by far everyone’s favorite financial planning element. I personally believe this is due to the fact that investing is much more exciting than insurance and tax planning. A Financial Advisor will review a portfolio’s allocation and assess its theoretical ability to reach a client’s financial planning goals and objectives. This includes determining if there is proper diversification among assets.

In addition the analysis will seek to determine the right investment approach for the client’s financial situation and what levels of future investment is needed in order to fund the desired way of life during retirement.

I hope this article helps you understand the elements of a comprehensive financial plan. In my next post (Elements of a Financial Plan - Part 2) I will provide a quick overview of the last three elements of a financial plan. As you can see the financial planning process can be intense. True Financial Planning seeks to provide a robust financial plan that will enable you to reach your life’s goals and objectives.