Self-Check on What Can Make or Break Your Financial Plan

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What is a financial plan?

A financial plan is important, we all know this, but very few of us have one. In the most simple terms, it’s a plan of your current (A) and future (B) financial goals and a strategy for getting from point A to point B based on your income, assets, debt, and expenses. Your financial plan is about charting a path for your future and how you’ll get there through a mix of saving and asset growth.

Mapping out your current state by financial planning

Every month, you should update important figures, such as income, expenses, savings… etc. Maintaining a monthly snapshot is important because it’s also a check-in on your finances. Some people frequently review their credit card statements, bank statements, and double check everything is accurate and correct. And, for some, periodically review and self checkup on the holistic financial picture helps gain a good understanding of their current financial state.

Remember, each individual and family has unique needs, goals, and priorities. Under certain circumstances and life events, it is crucial that you review your financial plan and modify goals, and seek for professional help.

Now, let’s talk about how to self-check your financial plan. Some essential components are :

Let’s start with the strengths:

  • Adequate savings (particularly for retirement)
  • Appropriate investments
  • Proper insurance coverage
  • Relevant net worth
  • Suitable emergency fund
  • Valid and timely will and asset transfer plan
  • Well-articulated financial goals
  • Excellent cash-flow management
  • Knowledge about investments

Then, let’s look at

some potential weaknesses:

  •  Lack of Emergency Fund
  •  Insufficient savings (particularly for retirement)
  •  Inappropriate investments
  •  Uncovered catastrophic risks: Life, health, disability, property, liability, umbrella, long-term care…etc.
  • Inadequate net worth
  • No will or invalid will
  • Lack of defined financial goals
  • Poor spending habits – improper use of cash flow
  • Not yet updated asset titling 
  • the lack of investment knowledge

Review and Update Annually

financial plan. financial check up. Vet giving a dog a check up in a vets office

Every year, review your financial plan. The numbers you used from a year ago will probably have changed. Everything from your funding needs to your income to your expenses to the investment returns, your plan should be adjusted too.

Remember, the goal of all this is to think about your future and to formalize a plan. Accuracy is important but not paramount. If things change, adjust the plan accordingly.

Perhaps you were given a larger than expected raise or received a windfall like an inheritance or a large bonus, financial events that can accelerate your timeline. On the flip side, if you experience an accident or emergency that required you to dip into savings, those can affect your plan too.

Don’t over-react, especially on numbers like your volatile investment returns (it won’t be 8% exactly!), but adjust the plan accordingly, especially for funding needs that are within the next 5 years.

Having a plan is important because it helps you make informed decisions. Without a plan, you’re relying on your gut and you will rarely make a good decision with perfect information.

Your WitsMo financial coach (CFP® professional) can help you establish key factors in your plan, establish baseline assumptions, decide how to adjust them to maximize the success of your plan, and ensure you’re well on your way to financial freedom.

Next. Read about Money Behavioral Mistake #1. Loss Aversion.

Book a session today.

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