Sample Financial Plan: Steve and Amanda Doe's Example Financial Plan
It's a great privilege for us at Peak Financial Planning to share an example financial plan with you. We'd like to give you an idea of what the process looks like when working with us to build your financial plan.
When done right, the financial planning process will be something you only experience 1 time in your life (if you have to do it a second time, the first plan has failed...). This makes it difficult to visualize or relate to.
We will be using Steve and Amanda Doe (Fictional characters) as examples in this sample financial plan. Bear in mind that all financial plans are unique - what you see below are only a selection of the reports and data points that might be included in one's financial plan.
This written piece and accompanying video guide will illustrate the data points we will collect, how we address client goals, the types of reports and models we use to convey information, and ultimately how the partnership between you - the client - and we - the advisor - functions.
Disclaimer
All account values and investment returns in the "Doe's" example financial plan are based on historic market performance and do not necessarily reflect future market returns.
It is important to note that a financial plan is not a static document that you receive, like a car fax on your car. It is a dynamic, ongoing, iterative process that is routinely updated. It is a combination of financial models along with a relationship with a financial advisor that, when combined, provide a roadmap to reach your dynamic financial goals. If you would like some assistance auditing your financial goals - click here to schedule a free no obligation consultation.
With that out of the way, let's dive in to our personal financial plan samples.
Table of Contents
Choosing a Financial Planner
The Initial Consultation
The Financial Planning Process
The Data Gather Process: The Financial "Assessment"
Gathering Documents
Setting Up the Software Tools
The Financial Plan Proposal: The Financial "Diagnosis"
Reviewing Your Personal Financial Plan Recommendations
The Financial Plan Presentation - Receiving your Financial "Prescription"
The Cash Flow Plan
The Investment Plan
The Income Plan
The Tax Plan
The Estate Plan
Implementing Your Personal Financial Plan - Building your "Financial House"
The Ongoing Financial Planning Relationship - "Maintaining your Financial House"
Choosing a Financial Planner
Steve and Amanda Doe have gone through life as most of us do. Following the general guidelines without too much consideration of how to adapt those to their personal life. They have a spiderweb of investment accounts, bank accounts, and credit cards. They know roughly what they spend each month. They are comfortable speaking to each other about their finances, but rarely do as they do not have significant consumer debt and therefore don't feel like they are doing anything wrong.
One day scrolling through Facebook or Tik Tok, they came upon a video talking about the "Retirement Risk Zone" - a transitional phase in most people's financial lives where they have significant financial decisions to make that have ramifications for the rest of their lives. After watching the video together, they decided it was time to recruit the help of a financial advisor.
After speaking to friends and family and doing a bit of internet research, they arrived at a list of requirements for any financial professional they would consider working with.
1) The financial advisor needs to be "Fee Only". This means that the firm does not receive any commissions, sales related compensations, or referral compensation. The firm will only ever be paid DIRECTLY by the Doe's. This would effectively limit the conflicts of interest the firm might face.
2) The financial advisor needs to be a "Fiduciary". Acting as a fiduciary means that the firm is obligated to act in the client's best interest when making financial recommendations. To obtain "fiduciary" status, the firm must be Fee Only and meet rigorous regulatory requirements.
3) The Advisor must at a minimum be a CERTIFIED FINANCIAL PLANNER PROFESSIONAL. This would ensure that the practitioner would have the training, skill, and experience to support their financial plan.
Peak Financial Planning Advisors are Fee Only Fiduciaries and CERTIFIED FINANCIAL PLANNER PROFESSIONALS. Use this link to schedule a free consultation with us to learn more about working with our fee only, fiduciary financial advising team to build your financial plan.
With the above criteria in mind, the Doe's scheduled an initial consultation with Peak Financial Planning.
The Initial Consultation
The Doe's completed a "Financial Fact Finder" in advance of their initial meeting with PFP. Completing the fact finder was the first time they aggregated their financial picture into one place and proved to be a highly informative exercise. Having the data from the fact finder assisted their PFP advisor in assembling a list of questions that should be asked in advance of the financial planning process.
During the 1-hour, free consultation, PFP explained their business structure, their flat fee system, how they handle wealth management relationships, and what the financial planning process would look like. Their PFP advisor took them for a test drive in the financial planning tool - RightCapital - and reviewed a mock Client Agreement with them. Steve and Amanda were reassured to have an exact dollar amount of the fees, a timeline of the process, clear expectations of their time commitment, and an understanding of the guidance they would receive from their financial plan.
Steve and Amanda felt safe and comfortable with PFP's approach to financial planning and investment management and decided to move forward with the relationship.
The Financial Planning Process
Steve and Amanda's PFP advisor explained it would be helpful to think of the PFP Financial Planning process as three distinct phases.
Phase 1 - The audit of the Doe's financial position.
This phase would consist of 3-4 90-minute meetings over the course of 4-6 weeks.
The PFP team would use these meetings to assess, diagnose, and present the Doe's financial planning recommendations. Upon Steve, Amanda, and their PFP advisor coming to a consensus on the financial course of action, they would then move into phase 2.
Phase 2 - The implementation of the initial financial recommendations.
Their PFP advisor explained that phase 2 could take anywhere from 6 weeks to 6 months to complete, depending on the speed at which the team (Steve, Amanda, and their PFP Advisor) could execute. This phase would consist of a series of 30-minute "implementation" sessions where Steve, Amanda, and their advisor would get together to complete the actions outlined in their financial plan.
This phase is best visualized as the "building of the financial house". During this phase the ground is cleared, the foundation laid, the scaffolding put up, the roof put on. By the end of the implementation phase the Doe's financial house will be complete, and ready to move on to phase 3.
Phase 3 - The ongoing relationship: monitoring, and maintenance.
Steve and Amanda's PFP advisor explained that their financial plan is a living, breathing entity. It's dynamic and constantly responding to changes in their life's circumstances. Their PFP advisor explained that in phase 3 they enter PFP's ongoing financial planning process. They will meet their PFP advisor a minimum of 4 times per year to review, update, and execute on the pillars of their financial plan (described below).
Steve and Amanda are reassured to hear that they can reach out to their PFP advisor at any time throughout the year to schedule additional time (at no additional cost) by phone, zoom, or in person should their financial circumstances change.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
The Data Gather Process - The Financial "Assesment"
Upon formalizing the financial planning relationship with PFP, Steve and Amanda were walked through the firm's formal data gather process. Their PFP advisor walked through:
1) How to set up RightCapital (Financial Planning Software).
2) Which documents on the Document Gather Checklist the Doe's should provide.
3) How to securely share documents with their PFP Advisor.
4) How to locate screenshare support videos explaining the above should the Doe's need additional support.
Gathering Documents
The Doe's provided:
A budget worksheet (template provided by PFP)
Paystubs
W-9's
Tax returns
Account statements (mortgages, investment accounts, bank accounts)
Life insurance policies
Social security statements
Wills, and other estate planning documents (trusts, HPOA, medical directives).
These documents were uploaded to a secure file vault within the RightCapital planning tool for their PFP advisor to review.
Setting Up Software Tools
RightCapital provides a comprehensive financial dashboard. It would allow Steve and Amanda to aggregate their full financial picture into one place so that they do not need to house that information in their heads (and hope they do not forget details!).
Using the walkthrough video provided by their PFP advisor, they linked their bank accounts, investment accounts, credit cards, mortgage loan, car loans, and investment property value to RightCapital.
This will allow both Steve and Amanda as well as their PFP advisor to see real time updated balances for all their accounts in one place, saving a tremendous amount of time in future meetings by eliminating the need to play "account balance catch up".
The Data Gather Meeting
Behind the scenes, Steve and Amanda's PFP advisor performed an exhaustive audit of their financial position. The product of this audit was a list of tens of questions that needed answering from Steve and Amanda before their PFP advisor could proceed with constructing their personal financial plan.
During the Data Gather meeting, Steve and Amanda proceeded to answer their PFP advisors' questions. They discussed Steve and Amanda's goals:
1) They both want to retire in the same calendar year - when Steve turns 65 and Amanda turns 61
2) They want to have a $12,000 per year travel budget for the first 10 years of their retirement, with the option for a $12,000 travel budget for their entire retirement health and physical condition permitting.
3) They want to identify the maximum spending tolerance of their financial assets, not necessarily to spend it, but simply to understand what their boundaries and limitations might be.
4) They want to know if there is anything they can do to retire earlier then age 65 and 61.
Having a clearer picture of the Doe's financial situation and an understanding of their future goals, they scheduled their "Financial Plan Proposal" meeting.
Their PFP advisor set to work constructing their personal financial plans.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
The Financial Plan Proposal - The Financial "Diagnosis"
The CFP® professional at PFP added all of the Doe's personal finances into RightCapital.
The PFP advisor created the Doe's baseline example financial plan. The baseline plan shows whether or not the Doe's would be able to achieve their stated goals if they were to change NOTHING about their current financial behaviors. The baseline plan is used for comparison purposes so that the PFP advisor can show the effects of their financial recommendations against the Doe's current actions.
With the baseline plan complete, the PFP advisor then created a comprehensive list of all of the Doe's possible financial action items.
Reviewing Your Personal Financial Plan Recommendations
With the list of recommendations complete, Steve, Amanda, and their PFP advisor sat down to discuss the recommendations.
Their PFP advisor stressed that there is no perfect financial plan. Often times the plan that is the best "numeric" plan is actually not one that most people will execute on. It requires too much sacrifice, too many difficult tradeoffs.
The Doe's baseline financial plan example showed a probability of success of 66%. This indicated that as things currently stand, if no changes are implemented, there is too much risk of them being unable to meet their financial goals.
Their PFP advisor explained that they like to see a plan success rate between 75% - 90%. Under 75% and there is too much risk of failure. Over 90% and the client is not being ambitious enough with their spending goals. That being said, there are always exceptions to these guidelines that are discussed on a case by case basis.
Over the course of the 90-minute meeting Steve, Amanda, and their PFP advisor discussed each of the plan recommendations in detail. They discussed the tradeoffs of each item - some would cost time, some would cost money, and some would mean sacrifices in either current spending or desired future spending.
Steve and Amanda felt comfortable with the 8 recommendations their PFP advisor presented them. On the spot, their PFP advisor showed them 2 plan scenarios - one scenario where 5 of the 8 recommendations were implemented, and another scenario where all 8 of the recommendations were to be implemented.
In the first scenario (with 5 of the recommendations implemented), Steve and Amanda's probability of success went from 66% to 71%. At their PFP advisors recommendation, they adjusted that scenario slightly to reduce the Doe's annual pre-retirement spending by $400/month, resulting in a success rate increase to 74%! Steve and Amanda were surprised at how sensitive the plan was to spending and made a mental note to think further on that.
In the second scenario (with all 8 of the recommendations implemented), the probability of success went to a whopping 82%. In addition, their PFP advisor demonstrated how, by executing on the additional 3 recommendations Steve and Amanda would not need to reduce retirement spending and still maintain the 82% success rate.
To be thorough, the Doe's PFP advisor ran them through some additional scenarios showing them how working longer, reducing spending, and increasing savings might improve their plan success rate.
After talking through things, the Doe's were comfortable with proceeding with plan scenario 2 (with the 8 recommendations) with an understanding that they could adjust course as they approach their retirement age.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
The Financial Plan Presentation - Receiving your Financial "Prescription"
Incorporating the feedback from their prior meeting, Steve and Amanda's PFP advisor arrived at their Plan Presentation meeting with a final presentation of their financial plan. Their PFP advisor explained that their plan would be broken down into 5 "micro" plans: A Cash Flow plan, an Income plan, an Investment plan, a Tax plan, and an Estate plan.
The Cash Flow Plan
Because a financial plan is a hypothetical model, it is critically important that the inputs into that model are as accurate as possible. Cash flow, or spending habits, are the foundation upon which good financial plans are built. If estimates of spending are off by a significant margin, all of the downstream recommendations fall apart.
Steve and Amanda's PFP advisor recommended implementing a two-part cash flow system:
1) A bookkeeping system to monitor income and spending to start ASAP. This system would allow the Doe's to get in touch with their spending habits which would be beneficial for several reason. First, it would verify that the budget worksheet the Doe's provided is accurate, and that the spending data in the plan is accurate. Second, it would help the Doe's visualize their desired retirement spending so they could make informed decisions about what to keep, what to cut, what's negotiable, and what's non negotiable when it comes time to retire. Third, it would allow the Doe's to course correct quickly were their income or expenses to change suddenly.
2) A slush fund system to help provide savings cushions for annual expenses, one time purchases, and surprises. The slush fund system is a series of emergency funds that account for surprise areas of spending that PFP advisors find clients do not account for.
Based on their estimated spending in retirement, Steve and Amanda's PFP advisor recommended that they need to achieve a 22%-25% savings rate each year until retirement. Steve and Amanda are currently saving 17% of their annual income. With their bookkeeping and slush funds system in place, both thought it possible to increase their savings rate to the desired range.
The Income Plan
Steve and Amanda's PFP advisor explained that the income plan is the strategy of identifying how much income they will need to cover their desired level of spending in retirement.
The Required Portfolio Income formula is quite simple. It is:
Desired Spending - Guaranteed Income = Required Portfolio Income
Because Amanda and Steve have the retirement savings to support it, as well as being in excellent health with potentially longer than average lifespans, their PFP advisor recommended that they defer claiming Social Security until Steve's age 70, Amanda's age 66 in order to capture the largest guaranteed benefit.
Using their social security benefit estimates (found on their social security statements), Steve and Amanda's PFP advisor identified their portfolio income requirement. Their advisor explained that each year as they neared retirement, they would review their savings, cash flow, and investment performance in order to make adjustments to the income plan.
The Investment Plan
Steve and Amanda's PFP advisor explained that their Investment plan is constructed to support their income plan. In order to achieve their desired level of spending in retirement, they would need to achieve a roughly 7.5% rate of return on their portfolio assets. As their portfolio was currently constructed, they were achieving a 6.4% rate of return.
Steve and Amanda's PFP advisor recommended shifting away from a strategic asset allocation relying on vague numbers such as a “60%/40% portfolio” towards a tactical asset allocation that would both produce better growth and provide greater capital preservation.
Regarding their actual investment selection, Steve and Amanda's PFP advisor recommended adjusting their investment selection to reduce high mutual fund fees (1.45% average) and replace them with low fee exchange traded funds (.08%-.15%), some directly held stocks (no fees), and some directly held bonds (no fee's).
Their PFP advisor also explained that their investment strategy would adjust based on changes to the economic environment and technical market conditions.
The Tax Plan
Steve and Amanda's PFP advisor explained that outside of savings rate, taxes have the largest impact on ones financial life.
The Doe's PFP advisor recommended that they execute on two actions for their tax planning process.
The first - that both Steve and Amanda shift their contributions from ROTH 401k accounts and into traditional 401k accounts. This would save them roughly $15,000 per year in income taxes.
The second - that the Doe's execute a ROTH conversion strategy over the course of their retirement that, executed properly, would result in roughly $1,300,000 more tax adjusted ending portfolio assets.
In addition, given their wealth, it appears likely that the Doe's would be leaving sizable assets to their heirs. Steve and Amanda's PFP advisor explained that ROTH conversions help position their assets into more tax favorable buckets so that their heirs are not hit with huge tax burdens as a result of their inheritance.
The Estate Plan
Steve and Amanda had recently had their will and trust updated in advance of beginning work with Peak Financial Planning.
After reviewing their estate documents, their PFP advisor had no urgent recommendations to take action on.
They set up reminders to do annual reviews of the Doe's retirement account beneficiaries, as well as bi-annual reviews of their will and trust documents so as not to let those fall through the cracks.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
Implementing Your Personal Financial Plan - Building your "Financial House"
With the financial plan presented and agreed upon, Steve and Amanda moved into the implementation phase.
Their advisor had added all the action items to the project management dashboard of the financial planning tool, RightCapital in advance.
Together, the three of them went through the list of recommendations. They created tasks, set deadlines, and scheduled three 30-minute implementation meetings during which to complete those tasks. Lastly, their PFP advisor provided them a list of the additional documentation that would be required to complete those tasks.
Their advisor explained that the Doe's would receive regular email reminders about tasks assigned to them as well as a regular "digest" of the tasks accomplished during the prior week. This would keep the Doe's up to date about what their advisor might be doing on their behalf behind the scenes, such as opening new accounts, completing investment account transfers, updating beneficiaries, making investment model adjustments, etc.
Peak Financial Planning, as a wealth management firm, would execute the implementation of the investment and tax portions of the Doe's financial plan.
PFP handled all of the paperwork to move the Doe's taxable and retirement accounts to be managed at their broker and custodian, Charles Schwab.
PFP coordinated with the Doe's CPA to navigate the tax implications of the recommended portfolio reallocations.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
The Ongoing Financial Planning Relationship - "Maintaining your Financial House"
After the financial plan was built and implemented, the Doe's had an ongoing financial planning and wealth management relationship with PFP.
The Doe's PFP advisor explained that the ongoing relationship would be organized around 5 pillars.
Quarterly Bookkeeping
To ensure savings targets are met (pre-retirement)
To ensure portfolio drawdown rate is not exceeded (in retirement)
Executing the "Asset Location" Strategy
Performing their recommended ROTH conversions in the right years and in the right amounts
Executing the "Asset Allocation" Strategy
Performing investment management in response to economic/technical changes in the financial markets
Performing investment management in response to changes in employment, health, or family circumstances.
Executing the investment strategy
Performing regular portfolio rebalancing, tax loss harvesting, investing new funds, and providing liquidity for short/intermediate term funding goals.
Executing the optimal income strategy
Liquidating the appropriate investments
Drawing the right dollar amount from the right accounts
Managing the tax liabilities as a result of constructing portfolio income
The Doe's were comforted by having clear, predictable direction each year into and after retirement. They felt reassured to know that all their financial and investment advice needs would be serviced under one roof, for one comprehensive fee.
The Doe's PFP advisor explained that the PFP policy is to hold a minimum of 4 meetings per year with each ongoing client to ensure that they feel educated and connected to their retirement plan. Their advisor explained that there is no additional cost or mounting fees if the Doe's were to request additional time via meetings, phone calls, or emails.
The Doe's found that the ongoing relationship, team oriented, client first approach of Peak Financial Planning helps them sleep well at night knowing they have a true financial partner in their camp.
If you’d like to review some additional personal financial plan examples, please refer to our Youtube channel as well as the Case Studies section of our website.
Frequently Asked Questions
How long does the Financial Planning process take?
Financial Planning is an ongoing dynamic relationship between you and your financial planner. The process can be broken into three phases:
Phase 1: Onboarding - which usually takes 4-6 weeks.
Phase 2: Implementation - which can take between 6 weeks and 6 months depending on circumstances.
Phase 3: Ongoing Maintenance & Monitoring - which lasts for life!
What does the Financial Planning process cost?
Peak Financial Planning advisors are Fee Only, Fiduciary, Flat Fee advisors. We charge a $5,000 flat fee for the construction and year 1 implementation of your financial plan. In year 2 onwards we charge an ongoing flat fee of $416.67/month OR 1% of the value of the assets we directly manage. Send us a message for more details or view our pricing page here.
Where can I see a Financial Plan example?
You can view a printable financial plan example here.
Or you can watch this YouTube video for some additional financial plan examples.
Will a Retirement Plan help with financial stability?
Financial stability is a product of planning and education. The process of building a retirement plan will improve financial literacy, increase your financial education, create a feeling of confidence, and overall improve your odds of achieving financial freedom.
Why you should review financial plan examples.
Making changes to your investment or retirement strategy are extremely high risk, high consequence decisions. Before you make hasty adjustments to your plan, it’s critical that you review financial plan examples or case studies that the professional helping you has created. You want to make sure that that professional has the expertise and experience required to guide you successfully to your financial goals.
Other Financial Planning Resources:
If you found the information above helpful, click here to watch my free Masterclass training that explains how you can increase your income in retirement by up to 30% and avoid running out of money in retirement.
