Creating a comprehensive financial plan for a family of four
Mr. and Mrs. Thompson were two hard-working physicians in their mid-30s when they scheduled their consultation. They had two children, one who was 4 and already showing a promising bright future and the other was 10 with incredible artistic talents but suffered from a couple of mental disorders. After accumulating significant student loans from medical school and recognizing the pressures of saving for college and retirement, the Thompsons realized that they needed a plan in place.
They could not seem to figure out why there was no extra room to save in their budget. They were confident that their youngest would attend college, and they wanted to plan for their oldest living with them well into their adult life. With this in mind, they also wanted to ensure that both of their children were taken care of if something were to happen to them. Between their careers and raising a family, the Thompsons had put off the task of figuring out a financial plan, but a friend of theirs gave them the nudge they needed to contact us and begin the financial planning process.
- In our first meeting with the Thompsons, we had an in-depth conversation about their personal and financial goals and discussed the various components of their financial situation. It became clear after our review of their cash flow that they needed to begin tracking their monthly expenses thoroughly to find where money may be unnecessarily spent. Since this is the driving factor of every successful financial plan, we gave them a budget tracker as their first assignment to complete before proceeding with our working relationship.
- In our next meeting, we reviewed their monthly inflows and outflows and found some areas that could be adjusted to begin a systematic monthly savings plan for emergencies, college, and retirement. We placed greater emphasis on building an emergency fund and saving for retirement since there are many different options to explore for financing college.
- Additionally, because the interest rates on their student loans were relatively low, we agreed that the Thompsons continue making their regular payments.
- After a thorough review of their cash flow, we dove into their investments and found that they each have a retirement plan at work that offered a matching contribution.
- Lastly, we discussed the importance of implementing various estate planning documents, particularly a will and a special needs trust for their oldest child. These documents would lay out their wishes after their deaths and help ensure that both of their children would be taken care of in an efficient manner.
- We developed and implemented an in-depth financial plan that listed the action items mentioned above and included a cash flow analysis, an investment analysis, a budgeting plan, education savings and options planning, retirement planning, and various Monte Carlo simulations.
- We specifically defined how much should be saved each month toward an emergency fund until the agreed-upon amount was reached.
- We encouraged both of the Thompsons to contribute the maximum to their workplace retirement plans they felt comfortable with, at least up to the amount that they would receive a full match.
- We arranged a meeting with an attorney to establish a will and a special needs trust and ensured that their wishes were precisely laid out.
- The Thompsons were able to implement the plan developed specifically for their situation to begin their path toward a strong financial future.
- Throughout the years, we stayed in contact with them to help ensure the appropriate steps were being taken.
- With regards to their retirement planning, since both plans would be funded with pre-tax dollars, this would help enhance their present tax situation by lowering their taxable income.
- The Thompsons felt comfortable that their mutually-defined goals were being met and have trusted us to continue developing their plan to help meet the ongoing needs and goals of their family.
The preceding case study is for illustrative purposes only and may not be representative of the experience of other clients. Actual performance and results will vary. This case study does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted regarding your specific situation.