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10 Essential Keys to a Successful Financial Plan

Author: South Valley Chamber
Published: December 18, 2018

Article provided by Diversify

A sad, but very real, reality of financial management is the lack of real planning.  Millions of Americans wander through life without anybody steering their financial ship.  This lack of real financial planning leads to personal and family stress, lack of vision and long life and financial failure and hardship.

An effective and well organized financial plan puts you in control of your money.  No matter what your income level, it provides clarity, direction, and vision and hopefully accomplishment of financial goals.  Having met with thousands of individuals, the team at Diversify has observed and tracked the key elements of a financial plan.  This has led to the development of “Diversify’s 10 Essential Keys to a Successful Financial Plan”.

Stop settling for the insurance agents and financial advisors who sell your products WITHOUT A PLAN.  Get an organized and effective financial plan in place FIRST and then select the products to fit that plan.

1. Organize: Put your Financial House in Order!

  • Do you have a personal financial statement, which includes a balance sheet of your assets and liabilities, income statement and cash flow statement (budget)? Are you in control of your money or is your money in control of you?
  • In the event of death or disaster, do you know where all your important documents are, does your spouse know how to access your investment accounts, insurance policies, personal passwords, and login information, etc.
  • Is your financial house organized in such a way that you are in organized control?

2. Goal Setting: Set Clear, Distinct Financial Goals

  • “If you aim at nothing, you will hit it every time.” Zig Ziglar. You must have very clear goals of where you want to be financially.
  • Do you have short term, medium term and long term goals?
  • Are those goals prioritized?
  • Are those goals written down and are they being tracked regularly?

3. Emergency Preparedness:  The Rainy Day Will Come…….. Are You Prepared?

  • Do you know how long you could live without income and are your reserves sufficient?
  • Is your reserve money in a safe location that is liquid or easily accessible?

4. Debt Management

  • Do you have a precise debt elimination plan?
  • Do you understand the types of debt you own, the terms, rates, etc.?

5. Investment Management: Diversification & Portfolio Analysis

  • Do you understand the purpose each of your investments play? Which are short term, which are medium term, which is long term?  Which are preservation, which is income, which is growth?
  • Are you adequately diversified in multiple asset classes?
  • Do you know the fees you are paying and how those are affecting your returns?
  • Do you understand the risks and reward potential?
  • Are you putting enough money away each year to reach your financial goals?
  • Is your investment portfolio being regularly analyzed and adjusted for market conditions, time horizons, risk tolerance, diversification, etc.?

6. Protection Planning: Be Prepared with Proper Insurance. Don’t Get Trapped!

  • Life Insurance – 10 times your income
  • Disability Insurance- Is your income insured?
  • Health Insurance- Know your options
  • Long Term Care Insurance- Can you cover the cost of Long Term Care?
  • Property & Casualty Insurance (Auto, Home, Umbrella, etc.)
  • Business Liability Insurance

7. Tax Planning: A Financial Plan Must Include a Tax Plan

  • Deductions
  • Tax Credits
  • Capital Gains/Losses
  • Income Tax
  • Estate Tax
  • Gifting
  • Know when to Shift, Defer and Deduct

8. Estate Planning: Let Your Will Be Known!

  • Do you have a Will and/or Trust and is it being regularly updated?
  • Are you and your family prepared for death?
  • Do your investment and tax plans coincide with your estate plan?

9. Career Consistency: Where Are You Going?

  • Make a long term career plan and understand the power of consistency.
  • Understand the dangers of “job-hopping”. The grass isn’t always greener.

10. Children Planning: Get the Kids Off to a Head Start

  • Do you have an education funding plan or other funding plan in place for your children?
  • Your retirement is priority over kids’ education planning
  • There are multiple child savings plans. Do you have the right type of account in place?