You’ve heard about the importance of financial planning, but what does it mean to have a comprehensive financial plan? What’s the difference, really? Well, it’s a little bit nuanced, but an important distinction.
A financial plan is a basic goal-oriented outline. Think of it like a doctor’s prescription for better health. You go to the doctor because you want to feel better. That doctor assesses your symptoms and writes you a prescription. Essentially it’s a response or plan for an acute goal or objective.
A comprehensive financial plan is also a goal-oriented outline, but one that takes into account your entire financial history, your current financial health, and even the way you think about money and finance. It’s more like a long term visit to a wellness retreat center. Yes, you still get a prescription or protocol, but it’s based on a fully holistic assessment of your physical and emotional wellness from a team of specialists working together. It’s—for lack of a better word—comprehensive.
At Four Points Wealth Management, comprehensive financial planning is the cornerstone of building a relationship with our clients. We have a streamlined and systematic approach to help our clients each step of the way. It helps us understand them both from an investment and financial planning perspective, but also from an emotional standpoint. That last bit might sound a little odd in the context of financials, but it’s an important marker when it comes to how and why our clients make certain financial decisions.
Here are some comprehensive steps in financial planning
Step 1: Take Account of Where You Are Today
Before any planning, goal-setting, or action, you need to know the nuts-and-bolts of your financial life. Write down all of your assets and accounts: your mortgage numbers, your 401k, your brokerage accounts, and insurance coverages.
It’s important to understand the lay of the land before you build on it. This is not a time to mull over any regret or insights about your situation. A lot of emotion can arise here. I know how tempting it can be, but analyzing why you are where you are is futile at this point in the game. The story behind it will only slow you down. Keep your sights set on moving forward.
When you accept where you are, you can use that information to keep climbing the mountain. Believe in yourself: because you can and will get to the top of it.
Step 2: Own Your Emotional Relationship to Money
Once the nuts-and-bolts are accounted for, I like to understand my clients’ relationship to money. Things like, where they learned their financial planning practices. What are their values around money? What is their financial backstory? Are they risk averse? Maybe risk seeking? The psychological side informs me what my clients value and how best to position their financial accounts and decisions.
Consider turning the same questions onto yourself. What are your beliefs about money and how it should be used? What investments do you value over others, and why?
When you take ownership of your psychological connection to money, it’s not meant to psycho-analyze your past, but to inform your future.
You might have experienced a more traditional financial planning process or you used a basic Financial plan example as a blueprint from the internet, but it might not cater to you enough. If you’re trying to create goals that you’re not inherently comfortable with, it’ll feel like trying to fit a square peg into a round hole. You’ll resist it every step of the way. But when you’re aligned with your choices, suddenly saving and investing feels doable—maybe even exciting.
Step 3: Map Out Your Financial Goals
It may seem obvious, but your financial goals and aspirations change as you grow, learn, and age. You might have mapped out goals in your mid-20s, or maybe shortly after getting married, but now you have kids and a family to support. The financial target changes as you do.
Write a list of your priorities. What are you saving for? Where do you want to see yourself in 10 years?
You might find that you have different priorities from your spouse—that’s okay. I work with a married couple that has a fairly large age gap between them. The husband is preparing for retirement. He’s looking at medicare, social security, savings, and risk assessment during his last few years of working. His wife, in her late 40s, is in a completely different position. She’s assessing the span of her career, asking herself if she wants to retire early or not.
There’s a way to ensure every member of the family has their aspirations accounted for. But if you skip this step, assuming you already know, you might find yourself accidentally short-sighted.
Step 4: Evaluate Your Financial Blindspots
This is my favorite part of the job. I love diving into spreadsheets to help my clients analyze their unique situations and potential blindspots. I’m looking for what they’re already doing—or not doing—that might lead to financial risks.
If you’re younger, I’d encourage you to look at your life insurance policy. Did you take out a basic plan years ago? Is it updated to encompass your new cost-of-living? Are you over or under-insured?
As time goes on you may find that your investment strategy evolves and things change. Consider asking yourself if you are over-concentrating on one investment strategy? This happens more than you’d think. Maybe you have a lot of your money in one stock or one rental property. If that money makes up the bulk of your net worth, you’re limiting yourself. Not to mention, creating unnecessary risk.
Step 5: Prioritize Your Financial Needs into a Hierarchy
This is closely related to checking your blindspots. It’s vital to create a strong financial foundation to build from – which may allow you to take more calculated risks in the future. From there we can optimize what’s most important.
For example, if you need life insurance, this is when you find the best strategy to achieve that. If your investments need diversifying, this is the time to conceptualize your options there. Same goes for your savings and cash flow. Is there an opportunity to automate your budget a little more? Is there room to bulk up your savings account?
With my clients, this is the point where I’ll showcase the opportunities for growth and optimization. All, of course, to meet their highest priority needs as quickly as possible.
Step 6: Create Your Financial Action Plan
Finally, we move to the implementation stage. A comprehensive financial plan is worthless if you don’t take the necessary steps to take action. I’ve seen too many people get through the analysis phase, and even the recommendations phase, only to burn out and not implement any of the valuable guidance. That’s why, at Four Points Wealth, we take a systematic approach to helping our clients implement each step to help them toward financial clarity and confidence.
You may have realized from previous steps that you need to reconfigure your investment portfolio. Maybe you’ve even flagged it as a high priority in terms of your needs. But which options are going to best fit into your required timeline? Making these decisions on your own can feel tedious.
Laying the groundwork for what needs to be done is one thing. Doing it is another.
This is where working with an advisor becomes really helpful. And at Four Points Wealth Management, we have a fiduciary relationship with our clients, both as certified financial planners and as a registered investment advisor group. “Fiduciary” is an important word here. It means that all of the insights, services, and guidance we provide must legally be in your best interest.
When you’re creating a comprehensive financial plan, working with a licensed fiduciary advisor ensures that all of the advice you receive benefits you the most. This is so important when creating an action plan. It ensures that your needs and values are actually addressed.
Step 7: Pace Yourself
At Four Points Wealth, we create your financial plan based on need, ease, and timeline. And then we walk you through the implementation over a 6-to-12 month period. This lets us knock out one item at a time with ease.
If you’re set on doing it alone, pacing yourself is key. Executing a comprehensive financial plan can be overwhelming. There’s so much information on the web to figure it out on your own, but the implementation is the most important part of your financial journey.
Break down your tasks so that they’re attainable and sustainable. You’ll be amazed what you can accomplish when you’re not setting yourself up to burn out.
A Comprehensive Financial Plan Leaves Nothing on the Table
Overall, these are the seven core elements of a comprehensive financial plan. It’s so important to understand all the facts and details of your situation before diving in. That’s a big deal for us at Four Points Wealth. We want to understand where you are, what your goals are, analyze your needs and blindspots, and ultimately create the most optimized action plan for you.
If you’re in the market for your own comprehensive financial plan, don’t hesitate to reach out. We’re here to help.
Four Points Wealth Management
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