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Financial Planning


Jul 17
10 min

This blog post is all about what a financial plan is, the different components of a financial plan, and how a financial planner can help youAre you ready to set up a financial plan but not sure what it is or where to start? Are you looking for a financial planner but you are not too sure what the financial plan will actually include??In this blog post, I will be sharing exactly what a financial plan is, why I am a total believer in having one, and why a Certified Financial Planner (self-promotion is important too right?) can help you dramatically improve your financial life! Many people have a basic understanding of how to make a living, they go to work, they make money. Sounds simple enough right? Well, yes. It is simple enough in the sense that most people might know how to make money but not all people know how to achieve financial success. Even more complicated: how to feel financial security from the financial decisions they make based on money beliefs that have possibly been passed down from generation to generation.That’s where a financial plan comes in. In the most basic sense of the word, a financial plan is defined as “a document containing a person's current money situation and long-term monetary goals, as well as strategies to achieve those goals. A financial plan may be created independently or with the help of a certified financial planner.”

financial plan

This blog post is all about what a financial plan is, the different components of a financial plan, and how a financial planner can help youI am going to be super honest with you. A financial plan that actually helps you to achieve your short and long-term goals is hard to create because there are a lot of subject areas that you have to be knowledgeable about or willing to learn. It is something that you can certainly try to do alone, but I am about to break down the different components of a financial plan and they might make you think twice about not getting help from a professional.

YOUR CASH FLOW: AKA Your Income Streams and Your Spending Habits

The foundation of a financial plan starts with cash flow. One aspect of understanding your cash flow is the very clear and cut numbers aspect. Numbers don’t lie. Numbers can’t be inflated. They can’t be erased. If you made $6,000 last month, you can’t change that. You can change the future but not the past. So follow me for a second. If the numbers don’t lie and you can’t change the past, how can you create a financial plan that will work for you?When you actually try to sit down to create your plan, and you look at your income and your spending reports (aka your bank statements), you end up justifying just about every purchase you made. That's not a problem, but where most people get stuck is when they lay out a plan based on them spending half of what they currently spend. So when you look at the numbers, make sure you understand your income streams and your monthly expenses.If you know yourself even a bit and you know that you need accountability, working with a financial planner might be that missing piece for you to succeed.I am not saying that you can’t make a plan on your own, I am simply saying that having a financial planner guiding you may help you cut down the time you spend on it.Anyway, back to our list! Remember, it all starts with understanding your cash flow. KNOW YOUR NET WORTHThe next component of your checklist is to know your net worth.What do you have once you subtract your liabilities from your assets?In other words, if you own a house worth $500,000 but you have a mortgage loan on it that still has a $200,000 balance on it, your net worth is $300,000. Do that with every single asset that you own.Also, remember to include things like the cash value on a whole life insurance policy if you have one. Basically, anything that you own and has equity on. A good financial planner will ask you to gather nearly every single financial document you have in order to fully understand your financial situation and create the best financial plan for you.

financial plan


This list is not in any particular order. Although the foundation of a financial plan is your cash flow, the fuel that keeps you motivated is your goals. Your goals must be broken down into very SMART goals in order for you to stick to them.Think about what you want out of life as a whole: What do you love to do every day? What would you enjoy doing even if you did not get paid for it? Who would you spend your time with?What would you do if you had 1 year left to live?By starting with an overarching theme to your life and what you are passionate about, it will naturally help you start narrowing down your goals. What kind of car would you like to drive?Where would you like to vacation?The beauty of working with a financial planner to create your financial plan is that it is our job to understand your goals and tell you what you have to do to make them happen.Your financial planner will also help identify ways to achieve your financial goals faster and with less stress. Time is money and at the end of the day, you might not want to spend time trying to see if you can afford a certain house, you might just want a financial planner to give you their advice.

financial plan


Boy oh boy. Taxes are a whole other beast. If you are a total DIY’er and you know how to plan for your own taxes without leaving money on the table, kudos to you. That’s not an easy feat.A great financial plan identifies your current tax situation and guides you through the steps you need to take to maximize your income throughout the year. It helps you find ways to be in compliance with the tax code but take advantage of the tax deductions available to you.A financial planner should help you pivot your tax strategy when you have a life event that impacts your taxes. Things like having a child, switching jobs, retiring, starting required minimum distributions. Etc.


Insurance gets a bad rep. I can’t say I don’t know why. For the most part, insurance policies pay a very hefty commission to the person selling it and they usually add that cost to the policy cost to the person buying the insurance. Having a plan that tells you how much insurance you need and what type of insurance you need can save you a lot of money. It can also save you a big headache. When someone comes to me and tells me they were approached by their golf buddy to buy an annuity, I simply roll my eyes and get to work on analyzing the product that they are being pitched. Again, I am not saying every financial planner is fee-only (doesn’t make a commission), but you definitely can rest assured when you are working with a fee-only Certified Financial Planner who only gets paid for their unbiased advice. Your financial planner will be able to help you cut through the B.S. and only purchase insurance products you need. Life insurance, disability insurance, long-term care insurance, umbrella policies, homeowners, and auto policies should all be reviewed.

financial plan


One of the reasons I love my career is because my grandparents did not get to retire comfortably. I can sit here and try to blame a bunch of different things but the bottom line is that they didn’t understand how social security works. They didn’t know that they would have to come up with the money all on their own because they didn’t have a pension. $850 was my grandma's monthly social security check. You can think of 1-2 things you can do with that amount of money and neither of them would be to pay rent.As a financial planner, it is so important to me to help someone understand their retirement and the different income streams that come into play in retirement. Your plan tells you how much money you can expect from your 401k, your social security, your pension, your spousal benefits, and it shows you what to do to maximize your retirement income. Sorry, that got depressing quickly but it’s the truth.


If you have children or grandchildren that you want to include in your plan, you will want to plan ahead for the cost of a college education if that’s one of your goals.Not every parent wants to provide for their children’s education though and that’s ok.You might be better off putting money aside for retirement so you are not a burden on your kids one day.Either way, a financial planner will be able to tell you that or advise you on how much to set aside for it.


If you are like the rest of society, you are constantly wondering how much money should be in your investment accounts. This is a question that comes up often: Do I have what I SHOULD have by now??Your investments make up part of the future income replacement in your plan. That means that having the right asset allocation, the right investment rate, a solid rate of return, etc. are all very important.What is more important though is having an understanding of what that means for you. If your investment account is $250k by the time you are 67, that might not be enough for your neighbor who is in debt up to her eyeballs still, but it might be enough for you who has no debt and lives a pretty simple life. That’s where a financial planner can create the right financial plan for you.


Thinking about death and what would happen to your money when that happens is not fun at all. I totally get that. What is often missed though is the difficult decision that your family is left with when you don’t have the proper estate planning documents in place. A financial plan helps you identify the documents that you need or the ones you need to update. You would be shocked if you knew how many people still have their ex-spouses on their documents and they are now happily remarried. It is also important to think about who you want to make your end-of-life medical decisions. Do you want to be resuscitated?My grandmother did not have an advanced health care proxy set up the day she had a stroke. We spent 7 days at Standford trying to talk through “what she would want”.It was a living hell. When you have a financial planner guiding you and reminding you of what you need to do, you will certainly achieve financial peace.


This one deserves its own little corner because it has to be on your financial plan. Healthcare continues to be on the top of every retiree's list and health scares are unavoidable. Long-term care needs are one of the things that keep people up at night because it can happen so suddenly and without warning.Although some financial planners like myself do not sell long-term care plans, we advise you on how much coverage you should get and where. I personally also attend the long-term care discussions with the insurance agent that will sell the product to my client. If an insurance policy is not needed or not feasible, a financial planner will tell you that.


Once your financial plan has been created, your financial planner will tell you exactly what steps to take and when to take them. You will have to follow up meeting to make sure you are implementing the different action items and you will also have a better understanding handle on your finances.


I think you have learned a lot today. You know the different components of a financial plan and you know what a financial planner can do for you. If I were to boil it down I would say that a financial plan is your roadmap and your financial planner is your guide to make sure you don’t get lost but also that you learn the shortcuts to your destination. As always, if you have any questions feel free to reach out to me here[author_info]Pamela Rodriguez CFP®[/author_info]

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