What Does True Financial Planning Look Like?
Hint: It’s probably a lot more involved than you might think!
How to Spot “True” Planning
Most people have difficulty grasping what real financial planning looks like and what a good financial planner does for their clients.
I find that many people assume that advisors/planners are strictly your “money makers” and just help you manage your investments (This may be true).
Another common belief is that they sell you various forms of insurance (which also may be true).
In practice, the best financial planners are the ones that help you manage every aspect of your financial life. They act as your personal CFO in helping you get all of your financial affairs organized and coordinated.
The CFP® Board (CERTIFIED FINANCIAL PLANNER™ Board - the model for financial planning in the US) defines financial planning as advice that falls within eight broad topic areas.
Basics of Financial Planning
Retirement & Income Planning
Tax Planning
Investment Planning
Risk Management (Insurance)
Estate Planning
Psychology of Financial Planning
Professional Conduct and Regulation
A financial planner should be providing comprehensive guidance, addressing everything from cash flow, investing and retirement to estate planning and tax strategies. To give you a clearer understanding of what financial planning truly entails, let’s break it down by key areas.
1. Identifying Your Priorities
This a crucially important first step because it helps us define what this is all for. Where are we now and what vision do we have for the future?
Part of this exercise may be deliberately thinking about and brainstorming what is important to us about the future. Without knowing where you want to go, it’s impossible to create a strategy to get there.
I’ve found that most people haven’t fully mapped out what they want life to look like. Striving to retire at a certain age isn’t sufficient enough.
That’s where we come in—helping clients refine their goals, attach dollar figures and timelines to them, and build in flexibility for life’s uncertainties. Many of my clients already have the basics covered—home, cars, stable income—but planning for future opportunities is just as important as preparing for the known.
2. Optimizing Cash Flow
A solid financial plan starts with mastering cash flow. Regardless of how much you earn, if there’s nothing left for saving and investing, building wealth becomes nearly impossible.
Key numbers to track include:
Take-home pay (before contributions to retirement accounts, HSAs, etc.)
Average monthly spending
Surplus (income minus expenses)
The goal is to have at least 20% of your income available for saving and investing. If your surplus is low, the focus should be on increasing income, reducing expenses, or both. Boosting income often has the most impact.
3. Investments
It’s no secret that your investments are the vehicle in which you build wealth, attain financial freedom and live the life that you want.
Your financial plan necessitates a rock solid, diversified investment strategy.
To build a strong investment strategy, your planner will help you consider and incorporate the following:
Your risk tolerance and capacity (how much volatility you can handle without making emotional decisions and how much investing risk that your situation dictates that you can take)
Your time horizon (how long your money can stay invested before you need it)
Your asset allocation (how your investments are divided among stocks, bonds, real estate, and other assets)
Tax and Asset Location (the proper combination of accounts and investments in those accounts to maximize tax efficiency)
The goal is to have a well-balanced portfolio that aligns with your financial goals while minimizing unnecessary risk. The longer your money stays invested and properly allocated, the faster it can compound and grow.
4. Retirement Roadmap
A strong financial plan includes a well-thought-out retirement roadmap.
Retirement tends to sneak up on people so it’s imperative to wrap your mind around the intricacies of this sooner rather than later.
Many of my clients are either retired (and want to stay that way peacefully) or close and looking to make that transition as effectively as possible.
The challenge is understanding what it takes to get there.
To build a proper retirement roadmap, you need to understand the accounts available to you—your workplace retirement plan, employer match, Roth vs. traditional tax treatment, your income, and your tax bracket. From there, you need to define your target retirement timeline and the lifestyle you want to maintain.
Finally, you have to determine how much to save, where to save it, and how to invest those funds.
This can feel overwhelming, but it’s exactly what we help our clients navigate. The key is figuring out:
How much to contribute and to which accounts
Which accounts to prioritize first
The best investment strategy for long-term success
Once you have a clear plan, the next step is simple—take action and stay consistent!
5. Proactive Tax Planning
This one is HUGE. Effective tax planning has two essential components:
Understanding what you owe and proactively preparing for it.
Strategizing to minimize your total lifetime tax burden.
Many assume tax planning is solely about reducing taxes in the current year.
This may or may not be true given your setup with regards to income, plans for the future and tax rates.
The first step is knowing what you’ll owe. I see a lot of people underestimate their tax bills especially if they are subject to the higher tax brackets. Without proper planning, they might have spent those funds elsewhere—on a rental property, investments, or other expenses—only to find themselves in a difficult position when tax season arrives.
The biggest part of all of this is minimizing your lifetime tax bill.
If you just retired, you might not have a lot if income to show on your tax return. While this might feel good, you could be setting yourself up to pay tax at much higher rates once forced income kicks in (social security and RMDs from pre-tax 401(k)’s and IRA’s). That may present an opportunity to take some income out of your pre-tax accounts now at lower rates so that you are paying tax at lower rates today rather than higher rates in the future. This is just one example.
Strategic tax planning typically involves a number of things such as choosing the right retirement accounts and appropriate funding, Roth conversion opportunities, charitable giving using DAF’s or QCD’s, careful estate planning, etc.
6. Estate/ Legacy Planning
Estate planning is often overlooked, but it’s essential. Regardless of wealth level, every adult should have a basic estate plan in place, including:
A will
Medical directives
Powers of attorney
Guardianship decisions for dependents
Who gets what and at what time? If you have minor children, who will be their guardians?
Trusts aren’t needed for everyone regardless of what estate attorneys will try and tell you. They are generally good for avoiding probate, controlling your assets beyond the grave with regards to timing of beneficiary access, creditor protection, etc.
Most trusts including revocable trusts do not offer “tax benefits” as the taxes pass through to you as the trustee and they are includable in your taxable estate upon death because you held a “retained interest”. Irrevocable trusts work differently.
7. Real Estate Guidance
Whether it’s evaluating whether to purchase or sell a home or needing help evaluating a rental property, guidance on real estate is as important as any other area as its often the single largest asset that Americans own.
We help clients:
Decide how much to put down
Evaluate different loan options
Time refinancing strategically
Weigh the benefits of keeping a home as a rental or investing in additional properties
A well-thought-out real estate strategy prevents costly mistakes and ensures continuous tracking towards financial objectives.
8. Insurance
Insurance has a crucially important piece to everyone’s financial plan. As you start a family, advance in your career and begin to build significant wealth, a lack of appropriate insurance coverage can derail you and your family’s plans.
Situations that we may face:
Prolonged sickness or injury
Early and untimely death
Disability
Lawsuits
These things do happen to real people even if it may not feel likely to happen to you. Insurance is there for when you need it and you must be comfortable paying for these policies every year in hopes that you never need to use them. If you do, you and your family will be protected and able to continue to move forward.
9. Debt Payoff
Leverage can be purposeful in helping us get ahead financially but there are always tradeoffs to consider.
We typically think of “good debt” as being productive and purposeful in helping us further our financial position. Whether it’s a mortgage on appreciating real estate, a business loan used to continue to grow a company and increase revenue or student loans to further one’s education in pursuit of higher lifetime career earnings. These are examples of productive debt and they often come with lower interest rates.
Alternatively, credit card, personal loan, payday loans don’t play a part in getting us ahead and they come at high costs (very high interest rates) that make it tough to dig your way out of.
10. Building a Strong Professional Team
Financial planning isn’t done in a vacuum—it requires a team approach.
Your team of professional advisors might look like:
A financial planner (to oversee the big picture as your personal CFO)
A CPA (tax specialization)
An estate attorney (legacy planning)
An insurance specialist (for risk management)
Coordinating these professionals ensures all aspects of your financial life align with your future vision and that there is clear and open communication with no gaps.
Ok, So What Now??
There is a lot that goes into managing all of this. It’s complex, it can be overwhelming and feel intimidating. That’s where a financial planner can help take the weight off and deliver you tailored advice that will allow your future vision to happen as efficiently as possible.
I’ve said this many times but financial plann “ing” is what matters. It’s the continous iteration. It’s a living, breathing roadmap that is revisited and tailored regularly to you and your family as your life and priorities shift.
You MUST revisit this at a minimum annually but especially when one of the following take place:
New job or loss of a job
Big promotion
Move states
Big purchase like real estate
New children or grandchildren
Upcoming retirement
Start a business
Receive an inheritance
Loss of a spouse
If you are curious on what a snapshot of a financial plan looks like with my clients, have a look here!
Have any questions about what you’ve read? Let’s talk about them!
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