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The First Step to Creating a Financial Plan

The First Step to Creating a Financial Plan

| August 07, 2019

Before you become a client of our firm or any other wealth management firm, it is vital to determine the stability of your financial foundation. 

A reputable financial advisor will analyze your income, spending, cash flow, tax situation, debt structure, savings, retirement plans, insurance coverage, planned purchases and asset structure. 

Secondly, as a small business owner, you should be going through this same exercise for your business as well. When was the last time an advisor consulted with you on your business? 

This data can be secured through a personal interview, investment statements, debt balances and tax returns. With this information in hand, your financial professional can assess where you have been in the past and where you will be financially. Together you can come up with best estimates for how these aspects will change in the future. 

While you may know where you stand financially, most people do not truly know their position. Simply working through this initial step is often an eye-opening experience that shows why a person is not as happy or secure about their finances as they wish. 

We believe the plan should focus on:

  • Retirement/Transition planning
  • Cash flow
  • Diversification
  • Becoming debt- free
  • Risk management
  • Investment strategy
  • Tax issues
  • Estate planning
  • Becoming more profitable
  • Where to get help

Here are a few examples of people who once thought their situation was hopeless, but after creating a plan to address one of the lessons above, discovered they too could be financially free. 

A couple from southern Oregon “tried” to save while one of them piled on debt to start a business. They fought often about – you guessed it – money. One meeting showed them the importance of creating a plan that would light the way to recover from their debt and realize their dreams. 

A small business manufacturer from Orange, Okla., needed a plan to insure against the risks that could endanger his family’s financial future. He suffered from one financial setback after another. He needed protection from setbacks like disability, a disruption in his business due to a natural disaster, or the death of the family breadwinner. The insurance would provide enough money on death to pay off their debts and for the family to live from the insurance proceeds. Because he was in remarkably good health, these risks could be addressed at an exceptionally low cost to the business.

Each of these situations changed and improved by creating a financial plan. Do not stop there. Set up a personal advisory team with a trusted financial advisor, a knowledgeable insurance specialist, a sharp accountant, a seasoned attorney, and an experienced business mentor who understands how to succeed in your business. This group is your informal board of directors. They will help ensure that your plan will succeed. 

Besides an individual plan for you, we also strongly believe your employees should also have financial plans. 

Employees who are also set on a course of financial freedom will be better employees because they will be less stressed about money. 

Perhaps, just as importantly, your company should have a guiding document which will include the cash flow, balance sheet, and a net income statement. It should also include actions and steps to improve the bottom line. 

Consider this for a moment – when, if ever, have you looked at your business plan? Do you currently have one? Have you identified the company’s strengths and weaknesses, opportunities and threats? What is your marketing plan? How can you change the company to be debt free? Who are your key competitors? In what do you need to cut or need to expand? What staffed positions do you need to create or trim to meet these goals? 

By clearly defining where you are right now, your advisory team can help you address roadblocks and help you quickly change course any time you move away from your goals and plan. Put this in writing and revise it at least every quarter. 

In addition – and this is critical – try and get your advisory team in the same room together or at least together on a phone call at least once each year so that a healthy dialogue can emerge among these critical people in your life. 

The next step, which we'll talk about next week, is to know where you want to go.

Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Individual needs vary & require consideration of your unique objectives & financial situation.


Please consult with your accountant or tax advisor for specific guidance.