Key Important Financial Planning Factors

Successful financial plan must include or take into account the following condition:

- It is based on ‘hard’ facts, such as age, earnings, health, investments; and ‘soft’ data such as attitudes, beliefs and values.

- The plan must be a clearly written, logical document that uses language appropriate to the individual.

- It must summarize the individual’s needs, objectives and concerns including attitude to investment risk.

- It sets out a statement of the individual’s goals and objectives.

- It identifies additional problems and issues, which must be identified and addressed.

- Any assumptions made must be stated and justified, including price inflation, earnings inflation, deposit interest rate, equity growth rates over 5–15 and 15! years, annuity rates.

- Consideration must be given to the individual’s assets and debts and this will be set out as a net worth statement (a personal balance sheet). This should include all assets with the ownership basis identified. Debt management help must be apportioned accurately.

- The inclusion of income tax fundamental calculations and review of tax position.

- Gross and net income and expenditure analysis, for example, as a cash flow or budget summary. Careful identification of shortfall or surplus income over expenditure. Liquidity and a cash reserve should be established.

- It should conclude with recommendations including timing, implementation and reviews.