Five Foundations for Your Financial Plan

5 Key Foundations for your Financial Plan

By Amanda Plonski, CFP®, CPWA®, CEPA

Establishing a comprehensive, long-term plan is critical in ensuring one’s financial health and wellbeing. A financial plan serves as a roadmap for decision making, helping you successfully navigate the opportunities and challenges that come with wealth. It is driven by your goals and aspirations and should consider your full financial picture.

Below are five foundational items that every financial plan should include:

  1. Financial Independence Modeling – Everyone has a number – do you know yours? Financial modeling can quantify the point at which you are financially independent (i.e., have the freedom and flexibility to work because you want to and not because you need to). This informs decision making around asset allocation, estate planning, and wealth transfer planning. Three must-haves for a prudent financial model include: 1) simulation analyses that consider bull, bear, and flat markets, 2) realistic return assumptions over multiple future financial cycles, and 3) a time horizon that anticipates you living a long life.

  2. Effective Tax Planning – It’s what you keep, not what you earn, that ultimately drives the success of your financial plan. The importance of proper tax planning cannot be overstated. From foundational planning like tax loss harvesting and asset location, to more advanced strategies related to wealth transfer and monetizing a business, an experienced financial advisor can help you maximize value by minimizing taxes over time.

  3. Estate Plan – A core estate plan can address various tax and non-tax concerns, such as caring for minor children, providing continuity in managing your finances, making medical decisions in the event you’re unable, protecting your privacy, ensuring that your loved ones are provided for in the manner you intend, and minimizing estate and transfer taxes over time. Just as important as having an estate plan is ensuring that it is properly funded. It’s important to periodically review how your assets are owned as well as beneficiary designations on retirement accounts and life insurance policies to ensure your plan reflects your current wishes and intended beneficiaries.

  4. Insurance Protection – Insurance policies help guard against the “what ifs” in life, protecting your family, as well as your balance sheet. An insurance professional can help identify exposures and present solutions that reflect your unique risk appetite. Commonly overlooked exposures include insufficient liability insurance to protect against potential lawsuits; employing household staff but lacking coverage to respond in the case of alleged wrongful termination, discrimination, and harassment lawsuits; trusts, LLCs, and family limited partnerships that own properties that are not added as Named Insureds to your policies; and serving on boards but not carrying insurance to protect against alleged wrongful acts in managing a company.

  5. Monitoring and Regular review – Life is constantly evolving, and so too should your financial plan! Periodic financial reviews help ensure that the financial aspirations you began with remain relevant. In addition to annual reviews, common triggers necessitating a plan update include income and expense changes; monetizing your business; major purchases; and life events like marriage, divorce, births, and deaths.

Reach out to us to schedule a financial planning session to help you achieve your family’s goals.

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About Cresset

Cresset is an independent, award-winning multi-family office and private investment firm with more than $45 billion in assets under management (as of 04/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.

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