How to Create a Truly Holistic Financial Plan

Natalia Lavrenkova /

We hear a lot about the terms “financial planning” and “financial plan” in the world of personal finance, but it’s not always clear what exactly that entails. And often, it’s easy to focus on just one aspect of your finances at a time, like setting up a monthly budget or saving for retirement. But the truth is, a solid financial plan is holistic, taking into account your present and future selves. In this “Financially wise woman” section, we talk to Kate Redden, managing partner at Merit Financial Advisors, about how to create a truly holistic financial plan.

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What are the different things to consider when creating a financial plan?

A comprehensive financial plan should always start with your goals. What do you hope to accomplish or achieve? And not just in terms of money.

I’ll use retirement as an example, because that’s probably the biggest question mark for most people. When do you want to retire? 65 years ? Never? As soon as possible? Everyone’s perspective on retirement is different, and you should spend some time thinking about your personal goal, not what your parents did or what society tells you is “normal.” And above all, what will retirement look like for you? Is it the chance to travel the world and do all the things you never took the time to do before? Or is it time to slow down, rest, garden, read?

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It’s important to get as much clarity as possible about your goals so that you can then start figuring out how much money will be needed to achieve your goals. I firmly believe that money, and the accumulation of money, should not be the end in itself. Money is simply a tool to help you achieve your goals.

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Investing is often part of an overall financial plan. How can you create an appropriate strategy for each of your goals?

Contrary to popular belief, investment strategy is not necessarily determined by your age. On the contrary, it should be more based on the timing of the invested money. Everyone should think of three investment “buckets” or timeframes that help determine their investment strategy.

Your “short-term basket” should include the money you will need over the next two years. For some people, especially those who are retired, this can be money to supplement their income. For others, it might be a car purchase later this year or tuition in the fall. These dollars should remain very conservative, regardless of your age or risk tolerance. If you know the expense is coming, you can’t risk the volatility of most investments.

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The second bucket is the “medium-term bucket” and should include money you may need over the next two to eight years or so. These dollars may allow for some volatility as they are not needed right away, but volatility should be moderate as well as growth expectations. You might not have much in that bucket if you have good income and no big expenses on the horizon, and that’s okay.

Everything else can be in your “long-term bucket” and invested more aggressively. Even if the investments were to be volatile or go through a period of decline, you have time to recover them before you need them.

What long and short term outcomes should you keep in mind when creating a holistic plan?

Each goal has its own timeline that must be considered when creating a financial plan. Often we focus so much on the long-term goal, like retirement, that we don’t pay enough attention to short-term goals, like taking family vacations and making memories while the kids are still youth. A holistic plan can help you determine a “finish line” and answer the question, “How much is enough?” » Once you know you’re on track to achieve your long-term goals, you often feel free to reconsider how you allocate your time and money in the short term, which can translate into a life more balanced.

GOBankingRates wants to empower women to take control of their finances. According to the latest statistics, women hold $72 billion in private wealth – but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to invest and are more likely to have debt, and women are still paid less than men overall. Our “Financially Savvy Female” column will explore the reasons for these inequalities and provide solutions to change them. We believe financial equality starts with financial literacy, which is why we provide tools and guidance for women, by women, to take control of their money and help them live richer lives.

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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Prior to joining the team, she was a staff writer-reporter for People Magazine and His work has also appeared on E! Online, Us Weekly, Patch, Sweety High, and Discover Los Angeles, and she’s been featured on “Good Morning America” ​​as a celebrity news expert.