TRUST & ESTATE PLANNING

First Things First: Understanding Your Financial Picture

05.01.2019

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A well-thought-out plan provides you with a clear view of your financial picture. This means understanding your personal balance sheet: your income, overall wealth and liabilities, and your most important asset—yourself.

Having a Clear View of Your Financial Picture
The first step toward achieving any goal in life is developing a plan. In your financial life, that begins with a clear understanding of your entire financial picture. With this, you’ll be prepared to make smart decisions that move you closer to your goals. 

Identifying Your Savings Goals
Whatever your life stage, your assets can usually be divided into different savings goals. For someone in the early stages of a career and building a family, your goals may be as simple as maintaining a household checking account to cover living costs, dedicating savings for a down-payment on a home and contributing to a tax-deferred 401(k) plan for retirement.

For others, goals may entail dedicating funds to charity, passing assets on to benefit the next generation or paying educational expenses for grandchildren.

Identifying your different goals enables you to:
  • Ensure assets are invested appropriately
  • Align your spending, giving and gifting against your defined goals
  • Create a well-coordinated, tax-efficient plan for what happens after you die
Taking Financial Inventory
To create your personal balance sheet, start by compiling a list of your assets, liabilities, financial accounts and physical property, along with their current market values.

As you gather this information, be sure to make a note of where you keep any related legal documents (such as contracts, titles and other documents that offer proof of ownership) and record the names and numbers of any attorneys, accountants or other professionals you work with. If you manage any accounts online, keep a secure log of usernames and passwords so they’ll be easily accessible (but safe and secure).

Locating Your Physical Property
List all your substantial physical assets, their current values or estimated values, and the location of any related documents. Be sure to include details about the structures and characteristics of your assets. For example, if you own a vacation home, include its purchase price, current estimated market value, annual property taxes and insurance coverage. Don’t forget about valuables such as fine jewelry, artwork and rare collectibles.

Estimating Your Income and Expenses
Track the income you receive on a regular basis and its source, including your paycheck (after taxes and other deductions). If you receive periodic distributions from a trust or other source of income on a regular basis and expect it to continue, include that number as well.

Next, track all your fixed expenses for necessities such as food, clothing and housing, and variable expenses such as entertainment, personal travel and dining out.

Finally, calculate the difference between your monthly income and expenses to see where you stand.

For some, this activity will highlight spending patterns that can be improved. For everyone, this will enable you to understand whether you are accumulating or spending, and at what rate. From there, your financial plan can begin to come into focus.

Projecting Your Future Wealth
While it may seem impossible to predict your financial situation into the future, understanding your trajectory helps you design the roadmap for where you want to go.

With your balance sheet and cash flows in hand, we will use our proprietary financial planning application to run calculations that provide you with wealth projections under various circumstances. As your situation changes throughout your lifetime, you will be able to more easily assess where you are against your plans and adjust them as necessary.

Understanding Your Results
Will you be successful in reaching your goals? What changes may be necessary to achieve success? With the 360 view of your financial picture that you will gain from completing these steps, you’ll be prepared to make well-informed decisions that move you closer to your goals.

Take the Next Step: Build Your Financial Roadmap 
With your goals articulated and your financial circumstances in clear focus, the next step is to create an actionable financial plan. We can work with you to develop your personal financial roadmap that lays out the path toward achieving your goals. 

Our sophisticated financial planning approach provides you with a clear picture of your entire financial life, helping you envision each of your goals and illustrate your progress along the way. And, as part of this process, we will explore “what if” scenarios, such as “what if you’d like to retire early?” or “what if you purchase a vacation home?” You will have an understanding of the implications of these possibilities to help you make such important financial decisions.



This communication is intended solely to provide general information. The information and opinions stated are as of May 1, 2019 and may change without notice. The information and opinions do not represent a complete analysis of every material fact. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA institute.

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