How to Write a Comprehensive Personal Financial Plan

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Plan your financial future today.
Plan your financial future today. (Image: Jupiterimages/Comstock/Getty Images)

Planning for the future requires more than just creating and sticking to a budget. It requires taking a comprehensive look at your finances and determining which big or small changes can be made to encourage long-term financial stability. While it is not necessary to work with an experienced financial planner to write and carry out a financial plan, doing so could be helpful. Before creating a financial plan, create a list of short and long-term financial goals, so you know where you hope to be in the future.

Incorporate a protection strategy into your financial plan. Decide if your protection strategy includes life insurance, which protects your loved ones if there is an unexpected death. Permanent coverage and term life insurance are common examples.

Add additional protections. Other protection strategies include disability insurance, which offers financial protection if you can no longer earn an income, and property insurance, which protects major purchases, such as real estate property.

Make estate planning a necessary part of your financial plan. Some of the basic documents you may want to create include a revocable living trust, which appoints a trustee to manage and distribute your assets according to the instructions of the trust, and a Durable Power of Attorney, which names a person or persons to act on your financial behalf should you become incapacitated.

Make provisions for emergency financial situations. Determine how much of a reserve or cushion you need to carry you through a short-term job loss or unexpected illness.

Look at existing loans and determine if the terms of each loan provide optimal savings. Refinance unfavorable loans and invest the money in a savings plan.

Itemize your investment strategy. Design an investment plan that supports your future cash flow goals. Consider stocks, bonds and investment accounts that can bring in long-term wealth.

Investigate the tax saving opportunities that exist for you. Speak with a tax attorney or accountant to learn how you can shelter income from taxation and take advantage of tax breaks on investment properties.

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