You may have heard the term “comprehensive financial planning” being thrown around, but what exactly does it mean? Comprehensive Financial Planning, also referred to as Holistic Planning in some cases, can have many different meanings depending on who you talk to. Let me explain to you how my firm defines it.
Comprehensive Financial Planning is essentially a process whereby a Financial Planner reviews a person’s entire financial picture (i.e. income, expenses, debt, investments, assets, tax returns, wills, trusts, goals, etc…). The goal is to review as much of this information as possible and to ask the right questions so that the best recommendations can be made.
FINANCIAL PLANNING IS A LOT LIKE A TRIP TO THE DOCTOR – SAY WHAT!!!!
Comprehensive Financial Planning is similar to how a doctor is supposed to treat you. If you have an ailment, it’s a good idea if the doctor asks you a series of questions such as: Where does it hurt? How long have the symptoms been present? Are you taking any medications? Does this run in your family history? Etc… Ideally, a doctor may also run some diagnostic tests such as taking your blood pressure, weighing you, doing some blood work, etc.
After they have all of this info, they will analyze it and determine the best course of action to treat you. If these steps were skipped and the doctor simply prescribed medication to you, that would be cause for alarm. In contrast, this would be similar to a Financial Planner “selling you a product”, which would also be cause for alarm.
SO, HOW DOES THIS BENEFIT YOU???
Essentially, a Financial Planner’s job is to help you benefit by:
- Minimizing Your Taxes
- Increasing Your Monthly Income
- Protecting Your Assets
- Building Up Your Bucket Of Money For The Future
- Passing Your Assets Efficiently And Cost Effectively To Heirs
- Increasing Your Net Worth
- Providing You The Peace Of Mind That You Are Minimizing Risks In Your Life
- Simplifying Your Financial Life
ONE FINAL ASPECT….
Another aspect of Comprehensive Financial Planning involves opportunity cost and choices with your income. For example, if you choose to use your money to pay off debt early, then you’ve lost the opportunity to use that money to fund your retirement. Or if you choose to use your money to save extra towards your children’s college education, then you’ve lost the opportunity to use that money to fund your retirement.
Essentially, you have choices with how to utilize your income and a good comprehensive analysis will provide you with the tools to prioritize your goals, minimize your risks, and make informed financial decisions.
Hopefully this blog clears up the muddied water a little bit in regards to comprehensive financial planning. Just remember, that it is not about a product but is about a process that helps you to sort through the myriad of financial decisions in your life so that you can potentially take advantage of the benefits listed above.
Brad E.S. Tinnon
CERTIFIED FINANCIAL PLANNER™
P.S. We would love to hear any comments you have. Please list them below.