What is a Financial Plan?

A recent study by Charles Schwab found that 75% of Americans don’t have a financial plan.

Nearly half of those who don’t have a financial plan said it’s because they thought they didn’t have enough money to bother. More surprisingly 40% said it’s because it either never occurred to them that one was needed, or because they wouldn’t know how to go about creating a plan in the first place!

Simply put, regardless of how much money you make, how much you own in stocks/bonds/funds/etc. – pretty much everyone needs a financial plan.

But when you really think about it, what does “having a financial plan” even mean? Is it a strategy on how to invest in the stock market? Is it stringently following a monthly budget? To be asked whether you have a “financial plan” is like being asked to drive to the most important job interview of your life, while being dropped off in the middle of nowhere without a map. The stakes are high but the instructions are vague.

The truth is financial planning is a highly personalized process and so it will mean different things to different people. Think of it as a way to: 1) take inventory of your current financial situation; and 2) analyze what, if anything, should be done to maintain or possibly improve your situation. Just as no two families are the same, no two financial plans should be the same.

So how do you get started on a financial plan?

Step one in making a financial plan is getting organized.

Maybe that means finally putting down on paper all your financial assets and debts so it’s easier to keep track of. Maybe that means figuring out what to do with the 401(k) from that job you left five years ago. Maybe it means sitting down and actually verbalizing what you want to accomplish in the first place. The goal of getting organized is to build momentum for the larger tasks at hand.

Step two in making a financial plan is outling your objectives.

Trying to retire early? Saving for college? Trying to get out of debt? When it comes to financial goals the choices are unlimited. But that’s the whole point – a financial plan should be custom-tailored to you and what you want out of life. Working with a financial advisor can help you identity, refine, and home-in on your goals.

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Step three in making a financial plan is writing out what you need to do to stay (or get) on track.

If saving for retirement is your goal, you’ll want to compare how much you need to live on versus how much you have saved and what income sources you have coming in. It gets more complicated than this in reality, but from a high level this is “back of the napkin” retirement planning math. If your goal is protecting your loved ones and minimizing risks, ask yourself – do you have a will? Do you have life insurance? Have you named beneficiaries on retirement accounts? The key is to write down relevant, actionable steps you can take to address any shortfalls towards meeting your goals and the things you need to do to stay on track. Again, this is where a professional financial advisor can help – keeping you accountable towards these steps and helping alleviate stress along the way.


Whether you’re just starting out or you’re a year away from retirement, whether you have $10,000 or $10,000,000 – you need a financial game plan. The point of an “A-Z” financial plan is to help you tackle the little things one-by-one because eventually, these little things add up to the bigger picture.

With the start of a new year, there is no better time to revisit your financial plan – or get started on one for the first time. At Taylor Hoffman, your objective is our passion. Learn more about our services here.



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