It is important to understand to know that no two plans should be the same. Everyone has their own set of unique circumstances that need to be accounted for. Below is a good start as to what a comprehensive financial plan should include:
Goals and Objectives: An understanding needs be established of where you are going and why. On top of this your goals and objectives should be shared with all key advisors.
Time Frames: It is important to differentiate between short, medium and long term goals as well as identify strategies and assets to coordinate with those specific goals.
Balance Sheet: A look at your current assets and liabilities gives you a starting point. What resources do you currently have that can be used more effectively to achieve your goals.
Income and Cash Flow Statement: As with the balance sheet your cash flow statement tells you what your lifestyle expenses are, your taxes owing and what is left over that can be put towards your goals.
Risk Management: Before you can begin looking at your investments we must protect your assets. You want to be prepared for poor economic times, health care issues, and other unexpected financial emergencies. Many excellent profitable investment portfolios have been undone by poor financial planning.
Strategies/Action Plan: Once you have a clear understanding of where you are and where you want a go you can start looking at specific strategies. These strategies include being prepared for emergencies/opportunities, tax plans, income plans, education, retirement, estate as well philanthropic. All of these strategies will change over time.
Projections: Projections allow you to look at how your strategies will impact your ability to achieve your goals through your assets, liabilities, net worth, income and cash flow statements. These projections will be partially based on assumptions. It is vital that your assumptions be realistic, reviewed and adjusted yearly.
Stress Test: It is important to recognize that regardless of how complete and comprehensive your plan is, it is an absolute certainty that the actual results will not be exactly as illustrated. The main culprit is that there are events that fall outside of this plan that we cannot control such as financial markets or the economic climate in general. The point of the stress test is to look at the “what ifs” and see how your plan will hold up.