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'Financial you' hits all bases, aligns with priorities, values

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At the beginning of a new year, many of us look to get a fresh start in areas of our lives.

Among other endeavors, we try to get organized, sleep more, lessen the red wine consumption, eat better, start or restart a fitness regimen and develop business goals.

It's safe to say a good number of us use this time to finally get ourselves on more solid financial footing. It's time to take a big picture look – also known as financial planning.

Financial planning is a great way to get your financial house in order. The process starts with identifying life priorities and is designed to help identify gaps in your financial picture.

Once these exposures are identified, you can work with your financial adviser to address them.

Unfortunately, many financial advisers and planners offer what is known as “financial planning lite.” It's a very cursory attempt at financial planning, often offered as an up-front enticement to convince a prospective client to let the adviser manage his or her investment portfolio.

This “lite' version of planning typically deals only with the client's basic goals and investment outlook.

So, what should a true, value-added financial plan include?

For most people, a thorough financial plan will have many of the following components. (This is not an exhaustive list; some situations may require additional analysis).

¦ Household budget – This calculates the difference between household income and expenses.

¦ Emergency savings plan – Three to six months, or more, of cash in a savings account is important to cover emergencies, such as an unexpected job loss.

¦ Statement of financial position – Also known as the net worth statement, this calculates the difference between what you own and what you owe.

¦ Financial independence analysis – This determines at what age you may have the option to continue working or not, given different savings and Social Security strategies, and your vision of an ideal retirement.

¦ Tax planning – Careful planning throughout the year can help reduce the taxes you pay as you strive to achieve financial goals.

¦ Education planning – Save for your education or that of a loved one.

¦ Estate planning – It is critical to put into place the correct documents and to title assets properly to ensure the orderly disposal of your estate upon your passing. Your estate plan also may include strategies to minimize potential federal estate taxes.

¦ Lifetime gifts to individuals and bequests to charity – Structuring the gifting of vehicles and assisting in deciding how to attain the most impact per-dollar gifted.

¦ Insurance planning – Examining the sufficiency, quality and cost-effectiveness of existing insurance coverage and identifying if there is a need for coverage where none exists. Coverages to consider are life, long-term care, disability, auto, homeowners, umbrella and others.

¦ Contingency risk analysis – Examining the need for identity theft protection, financial emergency kit, prepaid legal services, prenuptial agreement and other risk management vehicles.

¦ Employee benefits analysis – Evaluating the benefits available through your employer and choosing those most appropriate for your needs.

All components of your plan should be integrated with each other and with your investment plan. In addition, your financial plan should be collaborative between you, your family, financial adviser and other advisers (accountant, attorney).

Most importantly, the plan should be aligned with your priorities. For many, life is a series of trade-offs, so your plan should help make financial decisions that are in line with the values that matter to you.

Because it's not just about money, it's about your life.

Lisa Strohm is founder and CEO of The Athena Network, a financial and life management firm based in Upper Saucon Township, providing investment advice and financial planning offered through Good Life Advisors LLC, a registered investment adviser. (The Athena Network and Good Life Advisors are separate entities.) She provides fee-based financial planning and investment management for women, their spouses and extended families. She can be reached at 484-224-3439 or lisa.strohm@the-athena-network.com.

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