What Exactly is a Financial Plan?

by Mar 25, 2021Personal Finance

You know that to get anywhere in life, you need to have a financial plan. 

Do you have one? Do you really need one? What is it exactly? 


A financial plan is an overview, a compass, a strategy, a roadmap, a blueprint, that spells out everything financial in your personal and professional lives: your goals, your accounts, your assets, your businesses, your investments. Everything. 

It’s a combination of your estate plan, your savings plan, your investment plan, your retirement plan, and more, as well as the steps you need to take to reach your financial destination

Then it encompasses all of the corresponding documents (financial, legal, tax etc.). 

A solid financial plan should be dynamic and flexible. It should change as life and goals change: wedding, births, deaths, retirement etc. 


A financial plan can answer a variety of questions:

  • Am I saving enough to retire?
  • Can I afford to put my kids through college?
  • Am I financially prepared for unexpected life events?
  • Can I afford to leave my job and become an entrepreneur?
  • Will my family be protected if anything happens to me?
  • Do I have a well-balanced investment strategy?
  • Can I buy a new car? A vacation home? A practice?


Different people will tell you different things, but generally speaking, there are 8 components in a solid financial plan: 

1. Budgeting plan

  • Sources of income
  • Expenses
  • Balance sheet (assets and liabilities)
  • Savings plan
  • Access to cash
  • Financing large purchases
  • Credit score management
  • Loans (personal, credit cards, student debt, mortgage, car(s), practice, equipment etc. 

2. Investment plan

  • Investment portfolio
  • Investment accounts
  • Asset allocation
  • Risk tolerance and mitigation 

3. Business plan

  • SWOT analysis
  • Business insurance
  • Exit strategy 

4. Education funding plan

  • Your education
  • Kids’ education 

5. Tax planning

  • 401(k) and IRA contribution plan
  • Capital gains and income tax returns
  • Tax reduction strategies
  • Charitable giving 

6. Risk management

  • Healthcare, dental & vision insurance
  • Disability and life insurance
  • Beneficiary and survivor benefit plan
  • Liability insurance
  • Umbrella insurance
  • Long-term care insurance 

7. Retirement planning

  • Income estimates from retirement accounts
  • Social Security income estimates
  • Lifestyle plan 

8. Estate plan

  • Proper account titling
  • Asset protection
  • Estate/inheritance tax estimates
  • Completed will
  • Executor of your will
  • Guardian for your children
  • Revocable living trust
  • Power of attorney
  • Power of attorney for healthcare
  • Philanthropic gift planning
  • Record keeping for your heirs

Are you overwhelmed yet? Pretty extensive, right? Yet this is a very partial list!

Whether you create this plan on your own or you enroll the help of a pro (e.g. a Certified Financial Planner), here is a 5-step program to design your plan.


1. What are your financial goals?

  • What are you trying to accomplish?
  • What are your short- and long-term goals?

Examples include saving for a down payment on a house, paying off your student debt, buying a practice, or a college education.

2. Collect data and documents

  • List your assets and liabilities (businesses, investments, IRAs, 401(k), properties, loans)
  • What are your fixed expenses (rent or mortgage, utility bills, phone, debt repayment)?
  • What are your variable expenses (vacations, takeout, entertainment, clothes)?
  • What are your total yearly expenses (look at the past 3 years)?
  • What are your sources of income (paycheck, distributions, dividends or rental income)?
  • Are you cash flow positive or negative?

3. Design your financial plan 

Now that you know where you are and where you want to go, you can create a roadmap.

  • Saving goals
  • Emergency fund
  • Investment strategy
  • Expense plan for big purchase (house, new car, practice)

4. Carry out your financial plan 

Now it’s time to put your plan in motion.

  • Don’t think that you can make it all happen at once!
  • Start off small: instead of saving 20% of each paycheck, start with 5%.
  • Book appointments: meet with an estate attorney; meet your banker; meet a financial advisor; meet your insurance broker. 

5. Update your financial plan at least yearly 

Life happens. A financial plan is not a one-time project. It’s a constantly evolving concept that must adapt to life changes: births, deaths, moves, new jobs, investment results, asset allocation, saving goals, large purchases, tax strategies etc. 

Meeting with your significant other and your financial team (attorney, banker, financial advisor, insurance agent) to tweak your plan should happen every 6 to 12 months. 

So there you have it. Having a comprehensive financial plan is a gigantic undertaking. That is the reason very, very few people have one. 

It is admittedly extremely challenging to do this yourself. It’s cheaper, but difficult. 

This may be a good reason to invest in a trustworthy, fiduciary, knowledgeable financial advisor to guide you along the way. Just like our job is to guide clients with the healthcare of their pets, a financial advisor’s job is to guide you on the path to financial success.

Phil Zeltzman, DVM, DACVS
Meredith Jones, DVM
Co-Founders of Veterinary Financial Summit