Start the New Year With a Financial Plan

The holidays and the New Year are right around the corner. It is now the time to start thinking about what you can do to get your financial affairs in order for the coming year. The turn of the year is typically a time of reflection and planning to right areas that you may have let go astray in the previous year.

Start the New Year By Implementing a Financial Plan

Implementing a financial plan is our top financial item you should resolve to address in the coming year. This vital item could have a tremendous impact on your financial future, not only for yourself in the coming year, but also for generations to come. 

The coming year should be used to design, develop and implement a financial plan. Think about the amount of time that you spent last year in researching, booking and mapping out your vacation. Was more time spent on planning your vacation or your financial future? I would argue that, in most cases, vacation won this battle. (For related reading, see: Financial Planning: It's About More Than Money.)

Think Beyond a Budget

A financial plan is more than just a budget, reviewing your investment gains/losses, or even having a 180-page document that sits on a shelf or in a drawer. Your financial plan should be a living and breathing document. We have met with many clients over the years that have let us know they already have a financial plan and we ask to review it with them. It is rare that we encounter someone with a plan that was completed recently and/or that they have actually looked at in the last few years. This is not a plan, it is merely a snapshot of their situation at a particular time.

The plan should reflect your current circumstances and address your future needs, wants and wishes. At a minimum, the plan should review your retirement, education funding, estate planning, risk management, asset management and emergency fund strategies. Ultimately, these are all fluid areas and simply taking a snapshot of where things stand today will not define your ability to get where you want to be in the future. Some of the most important work that goes into a plan is the monitoring and updating of the plan over time.

What Goes Into Creating a Financial Plan

In most cases, putting a plan together and reviewing your progress over time can consume a good deal of your time. Hiring a fiduciary advisor that can help you get started and monitor this process over time is one way to start.

According to the CFP Board's Financial Planning Practice Standards, financial planning is a six step process as outlined here:

  1. Establishing and defining the client-planner relationship.
  2. Gathering client data, including goals.
  3. Analyzing and evaluating the client’s current financial status.
  4. Developing and presenting recommendations and/or alternatives.
  5. Implementing the recommendations.
  6. Monitoring the recommendations.

This process is a comprehensive overview of what a financial plan entails and we cannot express enough the importance of step six. You cannot develop a plan without monitoring and adjusting it as needed over time. This is too important and you should not wait another year. Start on the path to building your financial future today. (For more from this author, see: 5 Tax Planning Steps to Take Before the Year Ends.)


Disclosure: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.