Where to Start With Your Financial Planning

What is financial planning? Ask that question to the average Joe or Jane and the answer is usually centered on investments. Even some financial planners may operate with an investment centric model, but I don’t. Here’s why!

The Puzzle

I often equate financial planning to a giant puzzle. Each puzzle piece has an impact on the big picture.  With only one piece missing the picture is still intelligible, but, if several pieces are missing, the picture becomes harder to recognize. Similar to the puzzle, each piece of the financial plan makes up the entirety of the plan: therefore, every piece of the financial plan matters and should be managed accordingly.

As a holistic (comprehensive) advisor, It’s important for me to see the big picture (the entire puzzle) for my clients. I understand how each section of my clients’ financial world can impact the entirety of the plan. For example, investing may impact taxes, which may impact cash flow, which may impact debt reduction or wealth accumulation. On top of that, all of these things may impact your quality of life or quantity of sleep!

Where do I start?

While most people start a puzzle in the corners or edges, I suggest a bit of a differing approach to planning. I feel it’s important to start with the piece that touches almost every other piece: taxes. Taxes are the center of the puzzle and are the glue that holds the financial plan together…..or rips it apart. Taxes must be taken into account for almost every financial decision….good or bad. 

Just as a single puzzle piece can’t fully illuminate the puzzle’s picture, a single topic of financial planning can’t be construed as a comprehensive financial plan. Every piece should work hand and glove. If not, the plan becomes inefficient and potentially dangerous.

Once a puzzle is completed it doesn’t change, unless disassembled. Financial plans differ and are constantly changing…..life happens. This is another reason I enjoy my work. The ebb and flow of life should force us to review our plans, but most folks simply handle their personal finances reactively and deal with issues as they arise. This is very dangerous. My work with clients allows me to constantly massage our plans and keep our financial plan in step with life’s constant changes.

Is your financial plan similar to a puzzle right out of the box….scattered? Do your personal finances work hand in glove? If not, you should reevaluate your planning method and strive to connect the pieces and take a look at the big picture.

About the author

Troy Von Haefen, CFP®
Troy Von Haefen, CFP®

2 Comments

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  • Hi Kevin

    You ask a very good question. One suggestion is to work with a fee-only advisor who does not take custody your assets. It sounds like the scope of your needs and questions can be addressed in a smaller engagement….for example, my practice(along with several other advisors on this sight) offers a Financial Review, which would be a service offering in which you can get your questions answered in a simple format.

    You might also want to check out the website for a great organizer of fee-only advisors called The Alliance of Cambirdge Advisors. http://www.acaplanners.org

    Good luck!
    Troy

  • i wish to invest moneys from a property i recently sold i am 68 yrs of age,how to pick a good genuine FP.i am afraid who i pick may run off with my hard earned cash,i will live overseas for a few yrs so i wont be here to talk to the FP,thx,kevin

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