Is Comprehensive Financial Planning Right For Me?
Date: February 10, 2020

Is Comprehensive Financial Planning Right For Me?

In 2020, members of Generation X could be starting the final decade before retirement, for those born in the mid-1960s, or just hitting their peak earning years, for those born in the early 1980s. Either way, comprehensive financial planning could definitely be right for you.

Why? Because comprehensive financial planning looks at all the areas of your financial life, from your current spending and savings pattern to your retirement plans. It reviews what you want to leave your children and grandchildren. Without an analysis of all these areas, you might not be maximizing your finances – or furthering your goals. 

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It’s all too common to focus on daily life and lose focus on long-term goals that seem farther away. If your children are in middle or high school, for instance, you may be prioritizing saving for their college education – but thinking that a focus on retirement planning can wait until after the kids are out of school. 

By itself, of course, educational savings is a great idea. But if you’d like to retire to an island someday as well, you might be in for a rude awakening. The lack of specific targeted retirement savings might have put you far behind in your target date – or made it less achievable overall.

A Comprehensive Financial Plan Is Linked to Your Goals

Which brings us to the bedrock of what a comprehensive financial plan is. It’s a method of establishing your long-term goals and then planning to meet those goals financially. It’s not a list of “shoulds” everyone should meet to be prudent. Financial plans are unique because no two individuals have the same goals.

A financial planner will ascertain your long-term goals. Do you want to move to acres of Tennessee’s rolling farmland in the next decade, for instance? Start your own business? Retire early? Purchase a second home in another part of the world? All of those are potential goals, and only you know what you want to prioritize.

Then, a financial planner will review the following areas with you to ensure that you have plans in place to meet those goals and to ensure your overall financial well-being. 

Cash Flow Analysis

The building blocks of anyone’s financial plan is a cash flow analysis. Your financial advisor needs to know how much income you have every month, from all sources. They need to know your spending patterns, including how much of your income is going toward necessities such as a mortgage, utilities, and food, and how much discretionary income you have. They need to know how much you spend on liabilities, such as debt service. 

A cash flow analysis will reveal how much you can maximize investments in your long-term goals. It may also indicate that you could make other decisions about your spending patterns, in order to further your well-being, maximize your use of cash and optimize goal achievement. 

Investment Allocation And Strategy

Your investment portfolio is a primary engine in the achievement of your goals. A financial advisor will discuss the allocation and strategy with you, taking into account both your goals and your risk tolerance. 

Investments are allocated into asset classes, such as stocks, bonds, and cash. Each asset class has a risk-reward profile that indicates how much it can increase your money (reward) and the potential for loss to your portfolio (risk).

Stocks, for example, can have a higher reward profile than cash instruments. The S&P 500 gained more than 11 percent on average every year between 1973 and 2016 – and that average includes years in which it lost money. Cash instrument yields like those in certificates of deposit (CDs) are seldom that high and currently hover around 2 percent.

But stocks can also carry a higher risk than bonds or cash instruments. Why? Because stock markets fluctuate. The stock market has done very well the past several years, for example, but has down days and periodically has down years, which can substantially reduce the size of your investment portfolio. 

Because a down year can abruptly decrease the amount of money you have, it’s prudent to counterbalance the risk-reward profile of stocks by allocating part of your investment portfolio to the more conservative risk-reward of bonds or cash. 

A financial advisor will provide investment management strategy advice geared toward your long-term goals. They will also review the performance of your portfolio periodically, sharing the performance on a monthly, quarterly and yearly basis.

Retirement Planning

Everyone needs to have nest eggs for retirement, simply because Social Security is unlikely to fulfill your financial needs in retirement. Retirement savings, like an investment portfolio, should be centered around asset classes and allocation strategies that balance risk and reward. 

College Funding

College funding has become more important than ever to many people, because of the soaring cost of tuition and the exponential rise in student loan debt. A financial advisor will discuss your college funding plans for children and grandchildren.

Estate Planning

An estate plan covers what you want to happen to your assets if you die. Many people put estate planning tasks such as writing a will off because death is not a pleasant subject. 

But consider what will happen if you die without an estate plan. If you die without a will, your heirs or other beneficiaries may not be able to inherit what you’d like them to without waiting months, or even at all if the disposition of your assets is contested. Plus, if you want your assets to go to friends or organizations, the chances may be nil if there is no will indicating your wishes. 

A will or other parts of an estate plan should also specify your plans for dependent children should you or your and your spouse die. This kind of planning is essential for your family.

Consulting a financial advisor about a comprehensive financial plan is a prudent move for Generation X – and everyone else.

At Sapiat Asset Management, everything we do is driven by financial planning. If you are looking for financial planning in Greeneville, TN let us show you how our fiduciary, fee-only financial advisors can help you achieve true financial freedom. Contact us today, and start planning for your tomorrow.

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Sapiat Asset Management is a Fee-Only, Independent, Registered Investment Advisor (RIA), specializing in goal-oriented financial planning and investment management for Gen X Individuals & Families, their Businesses, & the Trusts that benefit them.


Steve Dick