Financial Planning process

The financial planning process can be a one-time meeting or a multi-year journey for those who want long-term advice and solutions. It starts with defining the scope of the work being done, understanding the client's goals and reviewing their current financial situation. The advisor's role is to provide a series of recommendations that can help clients reach optimal levels in multiple areas of their finances so they are in the best position to achieve their goals. Overall, the five main objectives of the financial planning process include:

1) Goal setting: Setting short- and long-term goals in multiple areas of your life; finances, career, education, family, community, and charity. Goal setting helps you stay focused on what matters most and guides you when making decisions throughout your lifetime. Plus, it’s fun and provides you with the motivation to do good planning and continuously make improvements.           

2) Maximize saving & accumulating wealth: The more money you save, the more wealth you will have. However, reaching optimal levels of savings can be difficult. This objective focuses on how much of your income you are currently saving and developing ways to increase savings over time. This could mean creating a budget or focusing on paying off debts so that money can be redirected to savings later. 

3) Investment management: It is important to invest your savings wisely based on your own personal tolerance for risk. This prevents you from making mistakes that are common among investors. Another factor that influences investment selection is the time horizon for when money is to be used and what it is to be used for; retirement, building a business, college expenses, etc. Lastly, tax diversification is taken into consideration since it is as important as investment diversification and can help minimize tax exposure over the long run. All of these elements are part of a good investment strategy but can be hard to implement without the assistance of an advisor.

4) Basic Estate Planning and Risk Management: Basic estate planning is all about making sure you and your family will be ok no matter what happens. One key aspect is establishing a Will, which includes selecting a guardian to take care of your children and a power of attorney to handle financial matters and make healthcare decisions in the event something happens to you and your spouse. This phase of the process also focuses on life and disability insurance planning so that you have adequate amounts of coverage throughout your lifetime. Providing your family with sufficient cash flow in the event of an untimely death or disability helps them to maintain their lifestyle, minimize financial stress, and limit the chances of financial hardships like a bankruptcy. 

5) Retirement Planning: Retirement planning largely integrates with the savings and accumulation phase of financial planning. But more specific to retirement is the task of creating a plan to secure lifetime retirement income for you and your spouse to ensure you have money no matter how long you live. Also, integrating your personal retirement savings with Social Security and other assets is critical to understanding the best way to generate retirement income. Another important element is planning for unexpected expenses that can quickly deplete retirement savings such as long-term care costs. Lastly, taxes and legacy goals are addressed. How do you minimize taxes and leave money to your family? How do you want them to remember you?

For more information, contact Derek Spencer, CFP® at or (973) 971-0002.