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What Is a Financial Plan?

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  • Written By: C. Mitchell
  • Edited By: John Allen
  • Last Modified Date: 30 August 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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In its most general sense, a financial plan is any sort of strategy for saving money. Most of the time, the term “financial plan” refers to long-range asset and investment planning, either for businesses or individuals. Simple savings arrangements and budgets can also be financial plans, provided they are designed to maximize account health over an extended period of time. Virtually any strategy for saving, investing, and amassing money over time is a financial plan.

A financial plan is usually based on two relatively simple determinations. First, a person must assess what kinds of assets he has. Then, he must determine where he wants to be, and when; the plan is the way to get there. Plans typically include a variety of asset allocation strategies, including different sorts of bank accounts and investment vehicles ranging from stocks and bonds to mutual funds.

For most people, identifying financial goals is a lot easier than actually achieving them. There are a lot of different options when it comes to growing wealth and building savings, and the choice can be overwhelming. The more complex a proposed financial plan is, and the more assets there are at stake, the more likely it is that a professional financial planner will be involved.

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Financial planning is necessarily different for individuals and families than it is for corporations. Most personal financial plans center on individual goals, such as saving money for college or planning for retirement. Business financial planning, on the other hand, may involve such things as international expansion, rules of incorporation, and high-yield business investment opportunities. The science of planning for such diverse situations necessarily requires planning professionals with a range of expertise.

Most business financial plans are crafted by in-house attorneys or members of a corporation's finance and accounting departments. Individuals often seek financial planning tips from estate planning and tax attorneys, too. Attorneys can help clients see the legal and long-term ramifications of certain asset structures. Accountants, who can identify tax pitfalls and benefits, are usually also often good sources of planning advice.

Straight financial planners are also available to advise and help craft financial plans for private clients. Some financial planners are affiliated with banks or investment firms, while others are independent. A good financial planner will take stock of all of a client’s assets, both realized and unrealized, and will craft a plan that balances risk with reward.

A financial plan need not be complex to be effective. While diverse investments often offer greater opportunity for rapid growth, they are not the hallmarks of what makes a financial plan a financial plan. The most important thing for the plan to achieve is a long-term vision of where money is, where it will be, and what the gains are along the way.

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