What Is Financial Planning?

June 24, 2022

What Is Financial Planning?

June 24, 2022

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According to the CFP® Board, “Financial planning involves look at a client’s entire financial picture and advising them on how to achieve their short- and long-term financial goals.” If this seems broad, well, it is—financial planning covers a vast range of areas with the goal of providing a comprehensive picture of your current situation and a roadmap to help you achieve your goals.

Here’s what you need to know about the financial planning field and the financial planners who work within it.

What Is Financial Planning?

Financial planning covers eight primary areas:

1. Cash flow management – Where does your money come from and where does it go?

This can include identifying your income source(s) and overall net worth, mapping out your spending, debt management, and building a budget and savings plan to support your needs and wants

2. Risk management/insurance – What risks are present or potentially possible in your life that could impede or set you back in attaining your goals?

This can include identifying possible, current, or future risks, current insurance coverage analysis, providing recommendations to address gaps in insurance/risk exposure, and long-term care coverage

3. Investment planning – Are you invested appropriately according to your financial goals, risk tolerance, investment time horizon, and expectations?

This can include evaluating your current portfolio and asset allocation against your goals and the level of volatility you’re comfortable with, identifying improvement opportunities or updates that can be made to better align your portfolio with your needs and goals

4. Tax planning – Are you optimizing your tax strategies to minimize your liabilities and keep more of your money?

This can include assessing your current income tax return and tax liabilities, maximizing use of tax-advantaged or tax-deferred investment and retirement savings vehicles and charitable gifts, using knowledge of current tax laws and strategies to ensure you’re taking advantage of those available to you, and evaluating your retirement income and the potential tax implications to ensure you have a tax plan as you age. This will often involve collaborating with a CPA.

5. Philanthropic planning – Do you want to give money to charities or other philanthropic ventures according to your values?

This can include planning for and distributing charitable gifting and optimizing the tax benefits for doing so.

6. Education funding planning – Do you want or need to save for your child(ren)’s education?

This can include setting up a 529 plan or other savings route to put away for your child(ren) or other dependent’s education.

7. Retirement planning – Do you have an optimal plan for your retirement?

This can include identifying your retirement goals and ensuring your plan accounts for them, optimizing your plan contributions and income sources, looking ahead to how you’ll take distributions from your retirement income sources and the potential tax implications, mapping out your cash flow and budget in retirement, and—we believe most importantly—taking steps to help ensure you don’t outlive your money and can live comfortably for 20, 30, or even 40 years into retirement.

8. Estate planning – Do you have the right estate plan in place for you?

This can include using legacy-building and wealth transfer strategies to help your family to minimize probate expenses, estate taxes, and delays and put more of your assets in their hands and ensure you have the right estate planning and business succession (if applicable) documents in place so that your assets are distributed according to your wishes. This will include working with an estate planning attorney as well.

What Services a Financial Planner Can Provide

A financial planner is a type of financial or investment advisor, which means they can be regulated by different governing bodies; they can be a broker-dealer or an accountant or insurance agent. The Certified Financial Planner (CFP®) designation is considered the standard of excellence in the field but is not a requirement to be considered a financial planner. You can read more about the difference between financial and investment advisors here. A financial planner can work within all the areas listed above to help you build a comprehensive financial plan to manage both your current and future finances.

 Here are some more specific areas a good financial planner can advise on:

  • Changes you might need to make to increase your savings or pay fewer taxes
  • The optimal amount you should be saving for retirement
  • Which retirement accounts you can and should be contributing to (e.g., IRA, Roth, 401(k)
  • If you’re using the best mortgage type for your goals and if you should pay off your mortgage or refinance
  • If you have the right insurance for your needs and if you have the right coverage amount (this could include life insurance, long-term care insurance, disability, property, casualty, health insurance, umbrella coverage)
  • How much money your emergency fund should have based on your spending and lifestyle, including covering unexpected events like a job loss
  • The investment return rate you need to achieve your goals
  • If you should downsize your home
  • The appropriate investment risk level for your needs and goals
  • If you’re optimizing your employer benefits
  • Helping plan for and through a major life change, like an inheritance or other financial windfall, divorce, spouse’s death, or birth of a child
  • Funding your child’s education
  • Business succession or buy-sell planning

Financial planners may specialize in certain areas, like retirement planning, but many offer a more holistic approach to help clients build a wide-ranging financial plan that addresses most, if not all, aspects of their financial situation.

How much a financial planner charges will likely depend on what type of planner they are, what services you need to purchase and how often you’ll need to work with them, and the complexity of your finances. When seeking out a financial planner, check their credentials, experience, and specialties (if they have any) and ask how they charge for their services to better understand the planner you’re working with and what they offer. 

What Does the Financial Planning Process Look Like?

We’ve talked a lot of that word—“goals”—in this article, so it might be obvious that the financial planning process should start with identifying and outlining your goals, whether they be aspirational life goals or specific financial goals. Money is necessary for just about everything in life, so more abstract goals could still tie into your financial plan.

Next, a financial planner should look at your current financial picture. Where does your money come from and go, and how much? What do you own, and what do you owe? What insurance coverage do you have? What is your risk tolerance and where are you invested? How much are you saving and in what type of accounts? What does your current tax return look like?

Then, they’ll compare your needs and goals to your current financial picture to identify gaps, liabilities, and exposure to risks to develop a comprehensive financial plan. They’ll help implement their recommendations that you choose to move forward with and manage your ongoing financial plan if you would like. Lastly, a key part is maintaining an ongoing relationship with your planner so that they can monitor and track your plan’s performance and make adjustments where necessary.

Most people can benefit from working with a financial planner, even if they don’t need help in all the service areas listed above—but not everyone needs one. If your finances are complex, for example, if you have multiple income sources, are in a high tax bracket, carry a lot of debt, or are going through a major life change, you may especially benefit from working with a financial planner. A financial planner can bring an objective perspective and experience and knowledge in areas you may not be versed in that can be invaluable and incredibly helpful to many—even DIYers.

If you want to learn about more personalized and advanced strategies, schedule a 15-minute call with our team.

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This blog expresses the author’s views as of the date indicated, are subject to change without notice, and may not be updated.  The information contained within is believed to be from reliable sources.  However, its accurateness, completeness, and the opinions based thereon by the author are not guaranteed – no responsibility is assumed for omissions or errors.  This blog aims to expose you to ideas and financial vehicles that may help you work towards your financial goals. No promises or guarantees are made that you will accomplish such goals. Past performance is no guarantee of future results, and any expected returns or hypothetical projections may not reflect actual future performance or outcomes. All investments involve risk and may lose money. Nothing in this document should be construed as investment, tax, financial, accounting, or legal advice. Each prospective investor must evaluate and investigate any investments considered or any investment strategies or recommendations described herein (including the risks and merits thereof), seek professional advice for their particular circumstances, and inform themselves about the tax or other consequences of any investments or services considered.  Investment advisory services are offered through Liberty Wealth Management, LLC (“LWM”), DBA Liberty Group, an SEC-registered investment adviser.  For additional information on LWM or its investment professionals, please visit www.adviserinfo.sec.gov  or contact us directly at 411 30th Street, 2nd Floor, Oakland, CA  94609, T: 510-658-1880, F: 510-658-1886,  www.libertygroupllc.com. Registration with the U.S. Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.


Anspach, Dana. (February 22, 2022). How a Financial Planner Can Help You Meet Your Goals. The Balance. https://www.thebalance.com/what-will-a-good-financial-planner-do-for-me-2388442

CFP® Board. (n.d.) What Is Financial Planning? https://www.cfp.net/why-cfp-certification/career-guide/what-is-financial-planning

Grace, Molly. (March 12, 2019). Do You Need a Financial Planner? Zing! by Quicken Loans. https://www.quickenloans.com/blog/financial-planner

O’Shea, Arielle, & Yochim, Dayana. (April 15, 2022). What Is a Financial Planner, and Do You Need One? Nerdwallet. https://www.nerdwallet.com/article/investing/what-is-a-financial-planner

Tretina, Kat, & Schmidt, John. (April 25, 2021). Financial Planners Help You Accomplish Your Money Goals. Forbes Advisor. https://www.forbes.com/advisor/investing/what-is-a-financial-planner/