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What are the Fundamental Components of a Financial Plan?


Every individual is unique in their specific financial goals and their ideal visions for their future. So while individual life motivations, circumstances, and goals might differ, the financial planning process will typically look the same, no matter who is taking it on.

Financial planning revolves around a core set of components that work in collaboration with every person’s unique considerations. Here’s a simplified breakdown of what a financial plan should entail, how it can help you create a strategy from scratch, or how you can apply it to your existing plan to continue pursuing your goals.

The Six Primary Components of a Financial Plan

1. Financial and Cash Flow Management

First, you need to gain a thorough understanding of your overall financial standing and situation. Only with the comprehensive knowledge and analysis of your cash flow and assets, can you then begin to make the most appropriate and strategic decisions regarding your income, savings, debts, purchases, acquisitions, and investments.

2. Asset Management

Next, you’ll need to ensure you’re properly managing all of your assets and optimizing your portfolio based on your current situation, as well as developing and following through on strategies designed for growth. You’ll also want to be sure you’re monitoring economic changes and developments and taking into consideration how ebbs and flows will affect your plans and future goals.

3. Risk Management

While you want to focus on optimizing your assets and investments, you must also ensure you’re effectively managing risk. Managing and mitigating your risk is executed through a well-diversified portfolio, which includes stocks, bonds, real estate, and any other holdings. Your risk increases with most of your money and investments tied to a single corporate entity or type of investment. Diversification minimizes your risk.

4. Tax Planning

You need to plan not only for taxes on your investments, but you also need a plan that minimizes your overall tax burden. Tax plans should include both pre- and deferred tax options, taxes that you’ll be responsible for now, those that you’ll pay throughout your retirement, and as part of your estate planning. A thorough understanding and strategic plan regarding investments, withdrawals, and investment vehicles, such as taxed deferred annuities, can increase your overall holdings over time.

5. Retirement Planning

If you know when you would like to retire and the lifestyle you want to uphold during retirement, you’ll be able to plan to those goals now. As your life and financial situation changes, and as you age, your retirement plan needs to be continuously updated and modified based on all of those factors.

6. Estate Planning

An estate plan helps you maintain your legacy and provide for your loved ones. It allows you to confirm your wishes for how your assets will be dispersed or maintained, designate your beneficiaries and heirs, and identify trusted individuals to be your executors, powers of attorney, or trustees.

Within each component of a financial plan are many details and items for consideration. You can always feel free to reach out to any member of our team at Hapanowicz & Associates, or you can reach out to me directly at bobby@hapanowicz-associates, with questions or for more information.



Talk with an advisor.

Engage with a qualified partner for financial guidance built on loyalty, empathy, and integrity.

Talk with an advisor.

Engage with a qualified partner for financial guidance built on loyalty, empathy, and integrity.