What is a Financial Plan
DEFINITION of ‘Financial Plan’ A comprehensive evaluation of an investor’s current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.
Most individuals work in conjunction with an investment or tax professional and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing the plan. These will be used along with estimates of asset growth to determine if a person’s financial goals can be met in the future, or what steps need to be taken to ensure that they are.
INVESTOPEDIA EXPLAINS ‘Financial Plan’
While there is no specific template for a financial plan, most licensed professionals will include knowledge and considerations of the client’s future life goals, future wealth transfer plans and future expense levels. Extrapolated asset values will determine whether the client has sufficient funds to meet future needs.
A good financial plan can alert an investor to changes that must be made to ensure a smooth transition through life’s financial phases, such as decreasing spending or changing asset allocation. Financial plans should also be fluid, with occasional updates when financial changes occur.
At LaSalle, we have found that a plan is a static document with with components, your personal state at a specific moment in time, as well as the economic and investment outlook at the time of the plan’s creation. All three components are changing and thus, the plan to be effective must evolve and change going forward. At client review meetings we are discussing and reviewing all three but an adjustment into the plan should only be done every three years unless a radical event has occurred.
Investopedia Link: http://www.investopedia.com/terms/f/financial_plan.asp
wikipedia Link: http://en.wikipedia.org/wiki/Financial_plan