here are many misconcep- matter how much income or savings you have, there is al- tions about the term “finan- ways a benefit from having a clear plan for your . cial plan.” At some point in Think about this. If you were building a $1 million our lives, we may have pur- home, would you need an architectural plan? Of course. chased a life poli- What if you were building a $100,000 home? Do you still cy after some discussion with need a plan? Again, the answer is yes. an insurance agent. We may We all need a to help us achieve our goals T have discussed with a in both our business and personal lives. Financial plan- broker our needs to invest ex- ning takes the guesswork out of managing your financ- tra savings. In fact, we may have gone to a financial ad- es and helps you understand the implications of each de- viser who provided a 40-page document labeled “Your Fi- cision you make. And because we all have different goals, nancial Plan.” it’s important to have a unique plan that works for you But these aren’t the only parts of financial planning. Fi- and your financial situation, both now and in the future. nancial planning is a process, a living, breathing service A holistic financial plan not only involves investing Charting the Course

2020 VISION

that integrates both - and -term financial goals money and building wealth but also optimizing and such as funding a college for our kids, buying obligations, everyday spending, family planning, set- a home or a second home, planning for a comfortable re- ting up your home, saving for your children’s education tirement, succession planning for a business, and legacy fund and saving for , as well as protecting your- and estate planning. Along life’s ever changing path, fi- self and your family with suitable insurance policies and nancial planning also provides mitigation of risks from arranging your estate. Business succession planning is liability and property damage and seeks to provide tax ef- also an important component of financial planning. All of ficiency. Financial planning’s primary function is to inte- these facets of a financial plan are interconnected. grate your financial life along its many and varied chan- As business operators, you are well acquainted with nels, and respond to life changes along the way. successfully creating a roadmap for success – your busi- As business owners know, a solid business plan is criti- ness plan. In developing your business plan, you have cal to the long-term viability of a business, and that same assessed available resources, planned for growth and attention should be given to your personal financial se- tracked your progress. Personal financial planning re- curity. Now that you have your business plan in place, it’s quires similar thinking and advice. time to focus on your, your family’s and your business’ fi- nancial . How to Pick a Financial Planner While it might sound like something only the very rich Finding the right financial planner/adviser takes a lit- need, everyone can benefit from financial planning. No tle time and legwork. Good planners will be ,

42 May 2019 THE DIRECTOR meaning they are legally obligated to act in a client’s best your needs, assessing your tolerance for risk and under- interests. Their financial advice is geared for your benefit standing what impacts your current financial picture, rather than their own. such as income, expenses and savings. Focusing too many Several reputable national organizations (not affiliat- resources in one area may put your overall financial suc- ed with our firm) require members to earn credentials cess at risk. by passing exams and also require continuing education. Remember, time and energy are two of your most im- Each offers a searchable database with state-by-state con- portant resources and you need to direct them to succeed tact information: National Association of Personal Finan- both in your business and personal financial spheres. cial Advisors (napfa.org), Financial Planning Associa- tion (plannersearch.org) and Certified Financial Planner 2. Collect Your Board of Standards (cfp.net). Financial Information It’s important for people to interview at least three plan- Inventory your current assets, including ners to pick the one who’s right for you. Compare creden- savings and . Determine your tials, look at how they are paid (fee-based, commission or current and long-term liabilities. Charting the Course No matter how much income or savings you have, there’s always a benefit to having a clear plan for your finances. Tips on meeting with a financial planner for your business and personal lives.

BY VICTORIA FILLET

both), do a background check, check for any disciplinary Assets can be classified into three distinct categories: actions and, of course, ask the tough questions. The CFP Board of Standards provides the following six steps to a.) Liquid Assets: Liquid assets are those things you own prepare you for meeting with a financial professional. that can easily be sold or turned into without los- ing value. These include cash and checking, money mar- Before Meeting With the ket and savings accounts. Some people include certifi- cates of deposit (CDs) in this category, but the problem is Financial Planner that most of them charge an early withdrawal fee, causing 1. Identify Your Goals your to lose a little value. It’s important to know what you are plan- ning for, and remember, managing day- b.) Large Assets: These include such things as houses, to-day expenses should always come first. cars, boats, artwork and furniture. When creating a per- Then consider the short- and long-term sonal balance sheet, make sure to use the market value of goals for you and your family. The key is to set realistic the items. If it’s difficult to find a market value, use recent goals and then prioritize. sale prices of similar items. Your personal financial planner will create a roadmap c.) Investments: These include bonds, , CDs and to help you understand your financial goals and how to mutual funds in both qualified retirement accounts and achieve them. This means identifying and prioritizing your personal investment account. All real estate proper-

www.nfda.org May 2019 43 ty owned should be included. You should record invest- much money you’ll need to retire comfortably and man- ments at their current market values as well. age your wealth to cover expenses in later years. Investing Liabilities are merely what you owe. Liabilities include also plays an important role in the development of your current bills, payments still owed on assets like cars and retirement plan as a way of helping you achieve financial houses, balances, student and other security in retirement. loans. You can allocate remaining for investing after you deduct necessary spending and savings from your in- Insurance covers unexpected incidents or emergencies in come. A well-planned portfolio can help you ride out the life, such as accidents, illness and death, all of which can ups and downs of capital markets and adjust your risk ex- deplete your savings and erode your assets. Having ade- posure to achieve long-term growth within your risk tol- quate insurance coverage for these eventualities should be erance level. Investing is a process to maintain a portfo- a key component of your financial planning. A good plan lio that suits your risk appetite, with a mix of investment will make sure you have adequate coverage for health, life products to keep your portfolio afloat in any economic and property. climate. That is why evaluating your risk tolerance is an 3. Figure Out Where You Stand important part of investing. Your risk tolerance changes over time, and your holdings must adapt. Do a cash flow analysis to see how much Remember, investing is for long-term goals that are money comes in and how much goes out. more than five years away. Savings is for shorter-term Is there any left over? If so, is it being used goals – less than five years – since these assets must be wisely? kept liquid. Think about your expenses in three categories: fixed A note on emergency funds: Everyone needs an emer- (must be paid every month), variable (we need to spend gency fund, which consists of the cash or cash-equivalent money on these, but are we spending too much?) and dis- assets held specifically for unexpected expenses. The rule cretionary (can we live without these expenses and put of thumb is that your emergency fund should equal ap- some of that money toward our goals?). proximately six months’ of living expenses. This is yet an- The purpose of determining your cash inflow and out- other reason to do a cash flow analysis – so you know how flow is to find your net cash flow, which is simply the re- much money you’ll need to cover expenses in a cash flow sult of subtracting your outflow from your inflow. A pos- emergency. itive net cash flow means you’ve earned more than you’ve spent and have some money left over from that period. On 5. Put Your Plan to Work the other hand, a negative net cash flow indicates that you As simple as it may sound, implementa- spent more money than you brought in. If you current- tion is the most challenging step in finan- ly have a negative cash flow or want to increase your pos- cial planning for many people because al- itive net cash flow, you must assess current spending hab- though they have their plan developed, it its and adjust accordingly. This is a very important step to takes strong discipline, commitment and desire to put it achieving financial success. into action. Saving and investing will be an important part of your 4. Develop Your Plan plan going forward. The point is to make your financial This is where you put together the timeline strategies achievable and to consider slowly moving up for your goals and determine exactly how to desired savings rates rather than jumping into some- you will achieve them. This step’s keyword thing that may be challenging if implemented too fast for is “develop” because financial planning re- your comfort level and budget. Implementing a personal quires devising alternative solutions achievable for each financial plan requires discipline in achieving the desired individual. With so many different variables to consid- savings and investment goals, but too much stringency er, your plan needs to evolve with your needs but remain may make adherence to the plan difficult and reduces the within your capabilities and risk tolerance. chances of ultimate goal achievement. Creating a retirement plan is an important aspect of Successful will tell you that just getting start- your financial plan, as it will help you determine how ed is the most important aspect of success.

44 May 2019 THE DIRECTOR Make sure to identify your individual risk tolerance. Financial planning is a dynamic and continuous pro- Risk is the potential threat that may impact the expect- cess. You should adjust your plan when there are signif- ed outcome of your investments. Investments that deliv- icant changes in market conditions or when you enter a er potentially higher returns are usually accompanied by different life stage. You should make adjustments based higher risk. Are you willing to accept potential losses in on your resources, needs and situation to ensure that your exchange for greater potential returns? plan is still in line with your financial goals. You cannot totally avoid risks; in order to achieve re- Life happens, and you will need to make adjustments turns, portfolios need to accept some risk. However, you depending on what is occurring. Life changes, laws can control your exposure to risks to an acceptable level change and so will your financial plan. That’s why it’s through diversification across various asset classes such called financial planning! as stocks and bonds. Make sure you understand exact- Think of the things that can change in your life – mar- ly what you are investing in and recognize the potential riage, divorce, the birth of children, career changes – and risks. what can change in your business – expansion, employ- The purpose of tax planning is to ensure tax efficiency. ee benefits, compensation, call volume and more. These Through tax planning, all elements of the financial plan events all require new perspectives on life and financ- work together in the most tax-efficient manner. An ap- es. Now think of financial changes beyond your control, propriate qualified retirement plan can often be used to such as tax laws, interest rates, inflation rates, stock mar- reduce ongoing income , as well as provide deferred ket fluctuations and economic . All of these fac- taxation treatment on investment income. Careful atten- tors must be reviewed regularly and mid-course correc- tion to tax law changes can be used to effectively avoid tions made, if needed. negative surprises in April and afford opportunities to structure your finances. Reduction of tax liability and Do You Need a maximizing the ability to contribute to retirement plans ? are crucial for success. Choosing whether or not to use a professional financial Estate planning is an important component of any fi- planner depends on your particular circumstances. If you nancial plan as well. Preparing for the worst may be un- have the time and interest to conduct your own research, pleasant to some, but it is an essential part of long-term along with a reasonable understanding of financial mar- financial planning. In the event of serious illness, disabil- kets and products, you may choose to manage your fi- ity or death, it’s important that your finances are in order nances on your own and create your own financial plan. so your family can be better prepared to meet life’s chal- If you don’t have the time or interest, have complicated fi- lenges and emergencies. With proper planning, wealth nancial affairs or significant financial decisions to make, transfers can be accomplished with minimal tax liabil- it’s best to work with an adviser. ities. One important point in estate planning is estab- The dynamics of financial planning play a role in every- lishing the care of minors if something happens to the body’s personal and professional lives. Having the com- parents; this must be agreed to and put in writing to be fort of a strong financial plan will provide the guidelines effective and provide for the right care of your children. necessary to achieve financial success. 6. Review Your Plan Regularly After formulating a financial plan, exer- cising strict discipline in following and Victoria Fillet is a financial planner with adapting the plan is critical. Review exist- Roosevelt Investments’ Private Client Group. ing cash flow and your investment portfo- Prior to joining Roosevelt, she served as managing lio from time to time to make sure they still fit your needs. partner of Blueprint Financial Planning and as a In meeting your financial goals, it is considered best prac- partner with Value Architects Asset Management. tice to review the performance of your portfolio regularly Fillet earned a bachelor’s degree with a concentration and rebalance your investments when necessary. This can in economics and finance from Fordham University help avoid keeping a portfolio that may over-concentrate and holds the Certified Financial Planner designation. on certain asset classes. She can be reached at 646-452-6700.

46 May 2019 THE DIRECTOR