Life goals–What would you like to achieve in your lifetime? This is something more than just retirement. When you look back on your life what is it that you would like to remember? Is it your career, your family or some accomplishment that will take you years to achieve?
Cash Flow–Cash flow is an important aspect of your finances since it will determine to a large extent your standard of living throughout your lifetime. Issues that should be addressed when thinking about your cash flow are the amount you save to meet your financial goals on a regular basis, the amount of readily available money you have to meet emergencies and the control of debt. High debt or little available discretionary funds indicates a need to take action
Net worth–Net worth is a measure of your total wealth and is the total of everything you own (assets) minus everything that you owe (liabilities). As part of a well managed financial plan, you should monitor your net worth to make sure that it is increasing over time. While the net worth of a newly married couple will most likely be low, a couple who has just retired should have a much higher net worth to provide for a comfortable retirement. Savings and investment rates identified in the cash flows as well as investments can have a significant impact on your net worth.
Taxes–Another significant aspect of your finances is the amount of taxes you pay. Are you taking advantage of IRAs, or employer retirement savings accounts to reduce your current tax liabilities? Do you receive a big refund check from the IRS each year (which is an interest free loan to the government) and use it to make other big purchases? Do you hold some investments primarily intended to reduce your taxes? These and other questions require a careful analysis of your tax management approach.
Investments–Although your investments are strictly speaking a part of your net worth, it is usually more beneficial to concentrate on your portfolio in terms of investment risk, diversification, asset allocations and time horizon. Your life goals as well as your other short term and long term financial goals have a definite impact on how you should structure your portfolio.And just as important is your attitudes about investing your money. Do you have the time and inclination to invest your money wisely and systematically monitor the progress to make sure you stay "on track?" Do you feel comfortable with the rise and more importantly fall of the stock market or do you lose sleep at night over it? The way you structure you investment portfolio can be a big determining factor in your life and should not be treated as a weekend hobby.
Insurance–Insurance is not a very popular topic for most people. Why should you continue to pay those annual premiums for something you may never use? And yet if something does happen, the use of insurance may be the only way to protect your self from a financial disaster. Insurance is referred to as "risk management" in financial planning terms and refers to the ability to shift the risk of a financial loss to an insurance carrier by using an insurance product. For most of us, although insurance is not at the top of our financial planning to-do list, it is usually necessary to protect against catastrophic events that could result in financial ruin. Life, disability, property, liability, medical and long term health care are the major elements of a prudent risk management approach.
Estate–Estate planning is also another unpopular financial planning topic. Thinking about our mortality is not an easy subject and yet with no clear idea of how your financial affairs should be handled when you pass away, there can be devastating effects on your family and loved ones. The basic "tools" of estate planning consist of documents that have detailed instructions for the care of your loved ones left behind (guardians for children for example) and the administration and ultimately distribution of your estate to your heirs or other beneficiaries. These documents usually consist of wills or depending on your wishes and the complexity of your finances the use of a trust to better control your estate administration and distribution plans. Powers of Attorney for financial affairs and as well as health care along with other health care documents such as living wills and medical treatment instructions are also an important part of an estate plan and are usually needed. Although at almost any age after 21 you will find that estate planning is essential, as you grow older, you will find that this subject will become increasingly important. A good estate plan should work hand in hand with your financial plans throughout your life.
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