Process-Driven: Comprehensive financial planning is about building wealth through a process, not a product. Financial products are everywhere, and simply putting money into an investment is not a gateway to getting rich nor a solution to your financial issues.
Holistic Approach: Comprehensive financial planning is about more than money. A comprehensive financial plan is not only built around your goals but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?
Integrating Different Aspects: It considers all aspects of an individual’s financial life, including budgeting, investments, insurance, taxes, retirement planning, succession planning, and philanthropic planning. These aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation. The goal of comprehensive financial planning is not only about investing but also about the financial journey.
Long-Term & Strategic: Comprehensive financial planning is long-range. It presents a strategy for the accumulation, maintenance, and eventual distribution of your wealth in a written plan to be implemented and fine-tuned over time.
What is included in Financial Planning?
Budgeting: Comprehensive financial planning begins with a budgeting exercise. This involves identifying all sources of income, including salary, bonuses, rental income, and investment income, and tracking all expenses to understand spending habits. A budget can help us identify areas where they can cut back on expenses and create a roadmap to achieve their financial goals.
Investments: Investment planning involves identifying investment objectives, assessing risk tolerance, and selecting appropriate investment vehicles that align with those objectives. This could include stocks, bonds, mutual funds, real estate, or alternative investments. A comprehensive financial plan aims to create a diversified investment portfolio that balances risk and return to achieve long-term financial objectives.
Insurance: Insurance planning involves assessing the risks an individual faces, such as life, health, and disability risks, and selecting appropriate insurance policies to mitigate those risks. A comprehensive financial plan aims to ensure that individuals have the right amount and type of insurance to protect their assets and income.
Taxes: Tax planning involves tax projection and strategising to optimise the amount of taxes obligations while remaining compliant with tax laws.
Retirement planning: Retirement planning involves creating a plan to save for retirement and determining how much income will be needed in retirement to maintain a comfortable lifestyle. A comprehensive financial plan aims to identify the most effective way to save for retirement, considering factors such as investment returns, inflation, and taxation.
Succession planning: It involves developing a plan to transfer assets to heirs in the event of an individual’s death. This includes creating a will for allocation of assets to the respective member of the family. A comprehensive financial plan aims to ensure that an individual’s succession is structured in a way that minimizes taxes and maximizes the amount passed on to beneficiaries.
How it works?
Setting financial goals: The first step in comprehensive financial planning is to identify short-term and long-term financial goals. This could include things like saving for retirement, buying a house, paying off debt, or saving for a child’s education.
Gathering financial information: In this step, an individual will collect information about their current financial situation, including their income, expenses, assets, and debts.
Analyzing financial information: After gathering financial information, the next step is to analyze it to determine an individual’s current financial standing and how close they are to achieving their financial goals.
Developing a financial plan: Based on the analysis of financial information, a comprehensive financial roadmap will be developed that outlines strategies for achieving financial goals.
Implementing the financial plan: Once the financial plan is developed, the next step is to implement it. This could involve adjusting spending habits, investing in certain assets, or making changes to insurance policies.
Monitoring and reviewing the financial plan: Finally, it’s important to monitor the financial plan regularly to ensure it remains relevant and effective in achieving financial goals. Regular reviews can help identify any necessary adjustments to the plan based on changing financial circumstances or life events.