What is a Financial Plan?

A financial plan is a personalized comprehensive strategy for accomplishing financial goals. It identifies a person's current financial position and sets short, medium, and long term goals while accounting for variables like inflation. A plan determines an appropriate asset allocation between stocks, bonds, and cash based on risk tolerance and includes purchasing appropriate insurance. It also establishes rules for investing and schedules for monitoring financial circumstances. Developing a financial plan leads to twice as much savings as not having a plan.