Werner C. Duever

Financial Security Advisor
Investment Representative
Freedom 55 Financial

Five steps for a sound financial plan

A sound financial security plan takes into consideration your present situation and creates a road map to help you get to where you want to be as well as protect what you already have. It also includes recommendations of how much money you’ll have to put away to reach your goals.

Step one: Goals and objectives

You’ll have to determine your present and future financial wishes. You should establish SMART (specific, measurable, achievable, relevant and time-based) goals.

Step two: Analyze your present situation

Create a balance sheet or “Statement of Financial Position” to determine your net-worth by listing all assets (home, business, investments and savings) and liabilities (mortgage, loans, credit cards). Your net-worth helps you understand your financial health. You’ll also need to figure out your cash flow by analyzing all your income sources and what your expenses are each month.

Determine the investment and insurance changes you’ll need to make to reach your goals. A good financial security advisor or financial planner can help you with this analysis.

Step three: Identify issues and problems

This is where you can discover your weaknesses and strengths. Through reviewing your needs and goals, you’ll be able to determine the gaps in your plan and how much you might have to save – and what insurance protection you might need.

Step four: Create and implement a plan

When creating a security plan, it’s important to include an emergency fund. Income may vary for business owners from month-to-month, so prepare for the lean months by establishing an emergency fund of at least 6 to 12 months of living expenses. A good way to do this is a saving principle called “pay yourself first”. From your earnings, put a percentage of your pay into a savings or an investment account before paying your bills.

Make sure to include the proper level of insurance coverage. A sudden unexpected event can upset even the best prepared plan unless you’ve anticipated and planned for catastrophic events.  Insurance products are instrumental in offsetting these risks.  Make sure you evaluate your life, disability, critical illness and long-term care insurance to ensure you’re fully protected.

There’s a lot of strength in having your financial security plan written down. If it has to be revised in the future, you’ll be better able to make the changes. Napolean Hill, the author of Think and Grow Rich said, “reduce your plan to writing. The moment you complete this, you will have definitely given concrete form to the intangible desire.”

Obviously, your budget will determine how much you will be able to save, invest and purchase the right level of insurance. You might have to sacrifice your retirement or short-term goals to make sure you have the right amount of insurance in place.

Step five: Continue to monitor the plan

Once a plan is put in place it becomes obsolete. It’s only a snapshot in time. Life events like the sale of a business, the birth of a child, purchasing a home or getting a divorce can change your needs dramatically. Your plan should be reviewed at least once a year to see if it still meets your goals and objectives.

Finally, make sure your plan includes planning for inflation and taxes. Inflation increases can affect your future purchasing power. Utilize experts like a financial security advisor or financial planner, accountant and lawyer to help you develop your plan.


This information is general in nature, and is intended for informational purposes only.  For specific situations you should consult the appropriate legal, accounting or tax advisor.