These features will help your plan succeed over the long haul

Quick notes:

  • It should include a budget and some flexibility

  • It shouldn’t be full of complicated jargon

  • It should reflect your current life, and change as you grow

Once you enter the professional working world, it is a good idea to pull together a professional-level financial plan that can be updated with each significant work promotion or life change. This kind of document will help you establish financial goals and ensure they’re on track.

If you’re well into your professional life, it is not too late to develop a first financial plan. Just start from where you’re at and take it from there. Here’s a list of some of the top features that any plan should include.

It should be easy to understand

Sure, financial plans are important, but they don’t need to be complicated. In fact, the more straightforward they are, the better the likelihood that the document is something you can use for the long-term, not just file away and forget about.

If your plan is full of jargon or complicated concepts that don’t make sense, ask the financial advisor who developed it for you to clarify some points. Also, consider if a small amount of financial education would help you understand things more easily. After these steps, if you’re still not finding the plan easy to follow, consider finding a way to build a more straightforward document.

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It should factor in income other than current investment returns

A financial plan shouldn’t just count on investment income to meet your goals. It should also account for a consistent stream of income from your earnings or from another source if you have it. This kind of diverse revenue stream helps ensure that the plan will grow as it should.

It should include a budget

Any kind of financial plan should consist of a clear way to track both income and expenses. In this way, you’ll know exactly what you need to do to reach your goals, and you can address any problems sooner rather than later. Having a budget keeps you in control and maintains your financial health.

Recommendations should correspond to your stage in life

A plan for someone in their early 20’s who is just starting out should look very different than a plan for someone who is mid-career or someone who is going to retire within the next 5-10 years.

Any kind of financial plan should include a clear way to track both income and expenses

What does this look like specifically? Someone in their 20’s is likely to have less income, lower mandated expenses, and need different insurance requirements than someone who is in mid-career with a fully active family. At the same time, someone who is nearing retirement will have a much different investment strategy than someone who is just starting out. Make sure your financial plan makes sense for your situation and isn’t just a “one size fits all” document.

The plan should be flexible and have an emergency fund

You never know what is going to happen in life, and your financial plan should be flexible enough to accommodate any unexpected economic impacts you experience. If something should happen that requires you to have more capital, your plan should be able to include strategies for maintaining assets that you can convert to cash, and expand investing timelines while still being able to retire at a reasonable point.

The best plans don’t let emergencies derail your goals

The plan should also account for setting aside money for an emergency fund. This is one of the strongest ways you can weather unexpected financial hits without compromising the chance you’ll reach your overall goals.

A deeper dive – Related reading from the 101:

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