Developing a Comprehensive Financial Plan for a Lasting Legacy

Regardless of your personal aspirations—whether they involve supporting your child in purchasing their first home, savoring a well-earned retirement, or ensuring your family's financial stability posthumously—a strategic approach is essential to achieving these objectives. Much like a map aids travelers on their journey, a panoramic financial plan directs you towards your life ambitions. Intentionality in managing your finances is critical.

What is a financial plan?

A financial plan is an extensive framework that encapsulates your current financial status, future financial objectives, and the strategies designed to meet those goals. While an effective financial plan evaluates aspects such as income, debt, regular expenses, and savings, it extends beyond to plan for asset growth through investments and potential depreciation for tax loss harvesting. It protects your wealth through insurance—ensuring your finances are not at risk in the event of an untimely illness, death, or disability. It also helps you plan for expenses that may change over time—for example, increasing property taxes, necessary home repairs as the house ages, support staff for in-home care or even assisted living facilities.

It devises strategies to achieve your goals, identifies potential risks, and monitors your progress continually.

Essential Elements of a Financial Plan

While it’s prudent for everyone to have a financial plan, there is no all-purpose financial plan that works for everyone. However, while your plan should be individually tailored to your unique financial situation, there are some common elements to successful financial plans that you might consider including in yours. These include:

• Regularly scheduled financial assessments. Analogous to a routine health check-up, this process reviews your financial health by analyzing your income, expenses, cash flow, and liabilities. If you're a client of The Private Bank, this is an activity you can plan with your dedicated relationship manager. Scheduling these assessments at least once a year, or whenever you foresee a significant change to your finances—such as a promotion or expansion of a business—is a best practice.
• Defined financial objectives. A solid financial plan should incorporate both immediate and long-term goals—from establishing an emergency fund to purchasing investment property, funding educational pursuits, or planning for early retirement. Having these written down for your financial team can help ensure they're making recommendations best suited to your goals.
• An emergency fund. It is prudent to have a reserve covering three to six months of expenses for unforeseen circumstances. Your emergency fund should include more than day-to-day living expenses such as housing and food, particularly if you have other expenses that may need to be covered during a period, such as tuition payments or quarterly taxes.
• Debt minimization. A panoramic financial plan includes any outstanding debts and offer a strategy to minimize or eliminate these bills.
• Retirement planning. Your financial plan should consider the income needed to live your golden years as you imagine. Various factors such as debts and taxes will influence your required retirement funds. With more free time in retirement, discretionary spending on activities like travel and dining may increase. As your home increases in value, you may be faced with higher property taxes. Discussing your retirement vision with a financial advisor is important to tailor your current savings and spending strategies, such as boosting your retirement contributions, refining your investment approach for passive income, or moving assets from higher risk to lower risk investments (or vice versa).
• Risk management. Protecting your assets is as important as growing your assets. Financial planning means planning for contingencies through insurance plans that can help mitigate the impact unexpected events, such as a serious injury or long-term illness, have on your overall financial future and goals.
• Investments. A comprehensive financial plan should include an overview of your current investments, everything from savings accounts, certificates of deposit (CDs), and bonds to mutual funds, stocks and real estate. By having a holistic view of your invested assets, you'll be able to understand how your overall financial portfolio is performing in relation to your financial goals. As a result of this review, your financial plan should help you strategize your approach to investing by indicating a need to diversify your portfolio, adjust your risk tolerance, or find new opportunities, which then become part of your plan.
• Estate planning. Trust and estate planning involves creating legal frameworks to ensure your assets are transferred to your beneficiaries upon incapacitation or death. Trusts manage ongoing asset transfers, while estates handle post-death asset distribution. These plans are best executed with legal advice and often include drafting a will, estimating taxes, and planning charitable donations. They may also cover advance directives for end-of-life care and selecting someone to manage your affairs. Regular revisions to your will or estate plans ensure that your latest intentions are honored.

Maintaining financial plans with professional advice

As life evolves, so should your financial plan. Changes such as marriage, the birth of children and grandchildren, or transitioning into retirement necessitate periodic reviews of your financial strategy. Engaging with a seasoned financial expert is beneficial in refining your plan and securing a lasting legacy for future generations.

Consulting with a trusted financial expert who can play an active role in guiding you through both short- and long-term financial planning can be beneficial to developing your comprehensive financial plan to help you leave a lasting legacy for generations to come.

Curtis Fessler is an expert in helping clients identify, prioritize and achieve their goals through a variety of financial planning strategies and techniques, such as estate planning, real estate management, business succession and continuation planning and philanthropic services. Read more about Curtis and how he can help you.

This material is provided for educational purposes only and is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Bank of Hawaii and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or investment advice. You should consult your own tax, legal, accounting or financial professional before engaging in any transaction. Neither the information nor any opinions expressed herein should be construed as a solicitation or a recommendation by Bank of Hawaii or its affiliates to buy or sell any securities, investments, or insurance products. Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved. Past performance is not a guarantee of future results.

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