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Financial Plans 101

"What is a financial plan? What does it include?"

Both are questions I like to ask when I first meet with a client. Their answers let me know what level of understanding they have.

In this post I’ll be answering the above questions. Just remember that not every plan is the same. Every person’s expectations and needs for a plan differ, depending on where they are in life. This post is designed to give you a blue sky idea of what a plan can include.

Without a plan outlining the steps needed, you won’t have a clear idea what needs to be done next. -Edward

Some years back, I read somewhere about Ernest Hemmingway’s approach to writing. He never stopped writing for the day unless he knew exactly where to pick up the next day. As someone who enjoys fiction writing that stuck with me. It made me realize I needed a plan, an outline before I could write a story. For my next story I did just that. Talk about a difference. With a plan in place thanks to an outline I could stop one day knowing exactly where to pick up the next.

To me, that answers what a #financialplan is. It’s a plan or outline laying out your financial goals. This plan includes steps, or action items, needed to achieve your goals whether they are short term (think buying a car) or long term (think buying a house or retirement). Much like writing a story, these action items guide you on what needs to be done each day or week, depending on the length of the goal. You can go to bed at night knowing what step needs to be taken the next day.

Without a plan outlining the steps needed you won’t have a clear idea what needs to be done next. A character in a story can’t get from Point A to Point C without Point B.

So what’s included in a financial plan? As I mentioned earlier there are many components to a financial plan. Depending on your needs not every step will apply to you. Below are items to consider when thinking about a financial plan.


Financial Big Picture

This one is a bit broad as it encompasses more than one item. That being said its important to look at this first when thinking about your plan.


A listing of any debt including amounts owed and interest rates. This will help you develop a repayment plan


How much are you spending per month and in what categories?

Cash Flow

How much are you earning per month, where is it going and how much surplus or deficit do you have after all expenses are accounted for?



What are you looking to do in the short term, near term and long term? This can include anything from home purchase, yearly vacation, new car, home remodel, upcoming wedding and so on. There’s no right answer as this can be different for everyone


While this can be considered a goal it should be its own topic. We all know college can be expensive. This doesn’t even have to apply to 529 planning for your children. Perhaps you’ve considered pursing a masters, PHD or a specialty credential. It never hurts to start thinking about and putting money aside sooner rather than later.


These two go hand in hand. Before considering an investment strategy do a risk tolerance questionnaire. See where you stand on a risk level so you can make sure your investment strategy matches your level of risk.


A simple needs analysis to make sure you have the coverage you need should an unforeseen emergency arise. This can include life insurance, disability and the all important health insurance.


An evaluation of whether you are utilizing a tax savings strategy while keeping within the Internal Revenue Code.


In its most basic form do you have a will or trust in place to protect your family if something happens to you or your spouse?

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