Three Steps to Implementing the Ideal Financial Plan

Implementing the ideal financial plan

The following article is an excerpt from our ebook “How to Develop a Successful Financial Plan and How an Advisor Can Help.”

You can talk the talk — you know the importance of a financial plan — but are you walking the walk? Knowing the importance of a financial plan isn’t enough. You need to actually put one together and implement it.

We can’t stress enough the importance we place on financial planning. We even went so far as to build our own financial planning software, used by advisors across the country to help tens of their own clients, that continuously monitors and updates your financial plan.

Before implementing your plan, take these three steps:

  1. Clarify objectives and constraints.

First and foremost, you need to understand what you will need in retirement.

To figure out what income you’ll need, find your “replacement ratio.” Take the income you would like to be making immediately prior to retirement, then figure out what percent of that income you think you’ll spend each year. That is the amount you’ll have to replace each year – your replacement ratio.

For most people, retirement is less expensive than working. The reason for this is threefold: no more saving for retirement, no more job-related expenses, and lower taxes due to lower income.

In addition to knowing what income you’ll need in retirement, you need to know what you want to accomplish with your money. Perhaps you want to do more scuba-diving after you retire. Figure out what kind of expenses are involved.

In addition, identify any financial constraints. Come up with a realistic figure you could save, decide on a percentage of risk you’re willing to take, and determine how easily you want to be able to cash out your investments.

  1. As soon as possible, identify estate issues that need to be dealt with.

Nobody likes to think about dying. As a result, a lot of people end up scrambling to put together a will and make other end-of-life decisions. However, the longer you wait, the harder it will be to put these pieces in place.

If you don’t already have a will, you should write one now. You can even write it on a napkin. Or if you printed out this article, you could write it on the back right now until you get a chance to sit down with a lawyer and financial advisor and draw up something a little more official. You should also identify a power of attorney who can make financial decisions for you in the event you are unable, and a health care proxy who can make life-or-death medical decisions for you.

Think of it this way: You want to make these decisions before they become urgent so you have breathing room to make the right decision. Plus, you never know what could happen tomorrow.

  1. After putting the financial plan together, document everything.

You’ve put a plan together, now you need to document it. Make sure you have records for your decisions, then have a lawyer look at them to make sure they’re legally binding where appropriate. A will can be informal, but it’s best to have it checked for legality. The same goes for the power of attorney and health care proxy. Don’t leave anything up to chance.

When it comes to your financial future, make sure you’re the one in control. By clarifying objectives and constraints, identifying retirement issues early, and documenting everything, you will have a solid plan in place that aligns with your wishes.

Want to discuss your financial plan with a financial professional? Click here to schedule a meeting with one of our advisors.

Download our ebook “How to Develop a Successful Financial Plan and How an Advisor Can Help.”


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