How to Make a Comprehensive Financial Plan

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Ups and downs in life are inevitable. 

New jobs, inheritances, or large medical bills can be anxiety-provoking, but they are far less intimidating when your finances are in order. 

That’s the power of a financial plan – it helps you create peace in your life by clearly allocating your assets so there is less fear when facing the future. Better yet? A good financial plan evolves and changes over time with your priorities.

Shockingly, a financial survey from Charles Schwab found that only one-third of Americans have any kind of financial plan. That means the vast majority are uncertain about their money, which is not a comfortable place to be. 

Creating a comprehensive financial plan is helpful for more reasons than security and preparedness – it’s a rewarding process to connect your goals to what you value in life, and to build a present (and future) life you genuinely want. It’s a process of looking within to find what’s most important to you and then making those touchstones a reality. 

Like building a house, a financial plan is the blueprint, strategies are the tools, and your financial advisor is a trusted contractor who will oversee those plans throughout every phase.

So how can you start building a financial plan? Here are some ideas to help you set the foundation. 

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Connect Your Goals and Money

Goals are the glue of your financial plan – they hold everything together. Underpinning those goals are your values. By starting with your goals and values, you build a more intentional and meaningful plan you’ll want to sustain and follow long-term. 

When discussing goals, you’ll sit with your Abacus advisor and explore your short- and long-term plans. Your advisor will listen and ask questions to learn more about you and your life. Sometimes it can be intimidating to think about goals because you’re not exactly sure what they are yet. One way to begin finding clarity is to consider what you want your life to look like five or ten years from now. Taking a longer view can help bring the shorter view into focus.

Here are some other questions that may help:

  • What are you doing today that you like, dislike, or love?
  • What else? Keep digging until you feel satisfied you’ve answered this question. 
  • What are your core values? Are you living by them?
  • What do you want to prioritize in your life?

As you answer these questions, you’ll likely begin to engage with your genuine desires, define what is most important to you, and make financial decisions that match your vision. 

Perhaps your child’s education is a top priority, or maybe you want to set up a sizable rainy day fund to cover unexpected costs due to job loss or poor health. 

There are many factors to consider, so working in partnership with an Abacus financial advisor who is well versed in the best ways to protect your money and who knows the right questions to ask can help you avoid making costly mistakes. 

Above all, your Abacus advisor will act as a mindful sounding board and an objective third party to help you create an effective financial roadmap.

Making the Most of Your Money

Once you’ve thought about your life and what’s important to you, the next step to success is building a financial plan to support it. And that starts by answering this question:

How much money do you actually need to support your goals?

This is an essential question given you won’t save for college in the same way that you would retire, buy a vacation home, or help out with your child’s wedding. Each goal requires a unique approach with a tailored investment plan. 

For example, if you want to save for your child’s college fund, your financial advisor could refer you to a tax-benefitted college savings account like a 529 Plan, which is a special savings account for educational costs. With a 529, contributions grow tax-free and distributions for qualified educational expenses (like tuition or books) are also tax-free. 

Perhaps you’re starting your career and want to set yourself up for a timely retirement without relying on Social Security payments. Your Abacus advisor may suggest an employer-based plan like a 401(k), one of the most common savings plans. 

401(k)s are an excellent option because contributions lower your taxable income and investment earnings grow tax-deferred. But your retirement savings strategy will look different as you reach certain career milestones or if you decide to work for yourself.

Are you late to the retirement savings game? It’s okay, there’s still time to invest — the annual maximum 401(k) employee contributions increased to $20,500 in 2022.

Your financial advisor can help you work proactively to discover how much you should save to meet your preferred lifestyle, and can also help you revise this plan as your dreams evolve.

When thinking about their money and future, many people ask, “what should I do with my equity?” Equity is often linked to a job offer and can include ownership share in a company, most likely through stock options. 

It can be a significant part of your total compensation, so it’s essential to understand what you have, how it works, the tax implications, and how it fits into your financial plan. You and your advisor can construct a plan for how equity can support your goals long-term.

It’s important to make your money work for you long-term since that will allow your money to compound, grow, and ride out any market volatility. Your Abacus financial advisor’s mission is to help you make wise money decisions that align with your values and help you embrace what matters to you most.

Focus on what matters most.

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Prioritizing Safety by Mitigating Risk

You never know when you will face a financial setback, and protecting your wealth with the right insurance is pragmatic. It’s not a one-size-fits-all solution: the best options for you will depend on your budget, risks, assets, and specific needs.

Surprisingly, Statista found nearly 1 in 10 Americans don’t even have health insurance, not to mention other necessary coverage like life, homeowner’s, and auto insurance.

When speaking with your Abacus advisor about insurance needs, they will never try to upsell you on insurance packages that give them benefits. Why? Because 100% of our advisors are fiduciaries that work on a fee-only basis. This means they never get any kickbacks or backdoor payments for recommending specific insurance coverage (or investment opportunity) to you. 

In short, your best interests drive everything we do. 

Beyond finding personalized insurance plans that save you money while mitigating as much risk as possible, we understand your insurance needs will likely change over time. For example, you will probably want life insurance during your career while raising a family, but you may no longer need it when you retire and your adult children aren’t financially dependent on you. 

Ensure You Don’t Overpay Your Taxes

Proactive tax planning is one of the most important ways your Abacus financial advisor will help you make the most of your money.

Tax planning is a process that looks forward to finding opportunities that save on taxes in the long run. It can include strategies like tax-loss harvesting (selling assets at a loss to offset gains), Roth conversions (converting money from a traditional account into a Roth to prioritize after-tax distributions), strategically realizing gains (like when to sell a business), and more. 

A critical element of tax planning is investing in accounts with different tax treatments, also known as tax buckets. Your advisor will help you leverage all three ‘tax buckets’ so you can maximize your money:

  • Pre-tax. This includes a traditional IRA and 401(k). These accounts let you make pre-tax contributions which lower your taxable income for the year. Reducing your taxable income can mitigate your total tax bill come April.
  • After-tax. This includes a Roth 401(k) and Roth IRA. When contributing to a Roth IRA, you put in after-tax dollars, the money grows tax-free, and qualified distributions remain tax-free. In 2022, the maximum IRA contribution is $6,000. You can also contribute to a Roth 401(k) if your plan allows. High earners may benefit because there are no income thresholds for contributing and the annual contribution limits are higher than a Roth IRA. 

Abacus can work with your Certified Public Accountant (CPA) to ensure you’re paying as little in taxes as possible. If you’ve never worked with a CPA before, we can connect you with a trusted professional. They will carefully examine your taxes to ensure you don’t overpay while enjoying as many deductions as possible.

Tax season is never fun, but at least with proper help, you know you are supported and your money is protected.

Your Estate is a Legacy 

Being financially responsible isn’t just something that affects you – it can change the trajectory of your loved ones’ lives, too.

Your Abacus financial advisor will help you intentionally explore how best to pass down wealth so that when the time comes, those you leave behind won’t have to deal with the stress of disorganized finances on top of their grief. 

When preparing your legacy, consider what you may need:

  • Trust: A trust ensures your assets are distributed according to your wishes. A trust is a fiduciary relationship that helps you control the asset transfer process. You can place several assets within a trust or name a trust as a beneficiary of assets, like your home, cars, and investment accounts.
  • Will: A will is a document that spells out your wishes, who will care for your children, where you want your personal property to go, and more.
  • Beneficiaries: Who will be eligible to receive distributions from your trust, will, or life insurance policy? It is best to review this annually to ensure it is up-to-date and your wishes are clear.
  • Co-signer: On your checking and savings account(s), it may also be in your best interest to consider adding a co-signer, trusted friend, or relative so they can help pay bills while your trust is being distributed.
  • Titling: Make sure all your assets are titled in the trust’s name so the transfer process can be as smooth as possible for your loved ones.
  • Power of Attorney: This document allows someone close to you to make personal, medical, or financial decisions on your behalf if you become incapacitated or otherwise can’t make those decisions for yourself. 

Remember, a comprehensive estate plan is a gift for your loved ones. By making all of these plans now, your family won’t have to worry about the financial stresses after you’re gone. 

Above all, you have agency to choose what happens to your assets – not the courts or your family. Your Abacus advisor can help you plan the necessary steps to ensure a smooth transition, creating a lasting legacy for your loved ones.

Making an Impact on Your Community

Beyond providing for your immediate family, how can you make a difference in the world?

Despite economic hardship brought on by the COVID-19 pandemic and inflation, charitable giving rose significantly in recent years. Giving USA reports that Americans gave nearly $500 billion to charities in 2021. 

Giving back is a fantastic feeling, and it’s fulfilling to step back and decide what kind of an impact you want to make on the social issues that speak to you. 

It doesn’t only have to involve money, either – you can donate your time or your talents. Maybe you want to help feed the homeless at a local food kitchen, spend quality time with older adults at a retirement home, or even volunteer as a tutor for struggling students. 

However you want to make an impact, make sure you are doing something authentic to your values and that fills your charitable cup. 

Why Abacus?

At Abacus, we focus on creating a holistic, values-focused financial plan specific to each client’s goals. 

Our goal is to not only help you to maximize your money through tax-saving strategies, risk management, investments, estate planning, and more, but also help you prioritize what matters to you most.

Our mission is to help you align your money with your values and live an empowered financial life free of unnecessary worries and costly mistakes. 

To learn how we can help you have a sense of ease and freedom, schedule a free introductory call today.


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