5 Steps to Developing a Written Financial Plan

According to our survey, those who have a written financial plan generally feel more confident they will reach their goals. Here are five steps to consider when crafting yours.

couple meeting with professional

What makes investors more confident? Forty-three percent of investors who have a written financial plan describe themselves as “highly confident” they will have enough money to maintain their lifestyle in retirement, according to the Wells Fargo Gallup Investor and Retirement Optimism Index for the first quarter of 2017.

The research also suggests that more investors could be unlocking the level of confidence a written plan can provide, as among this group only 40 percent of retirees and just 37 percent of non-retirees have written financial plans.

A written financial plan can take a great deal of guesswork out of planning for your financial future. It can also serve as a foundation to stick with when volatile market conditions might tempt you to veer off course.

Keeping these five considerations in mind will help you and your advisors create your plan.

1. Envision what retirement will be like

Some people want to stop working; others want to keep the sense of fulfillment a job provides by working part time or volunteering. Some want to travel the world; others long to sit on the patio with a good book. Understanding your goals can provide you with a sense of what retirement could cost and how much you need to save to support your desired lifestyle.

“At Wells Fargo Private Bank, we have developed an exercise called ‘discovery cards,’ which provides clients with a framework of common wealth concerns to consider as they develop their goals and objectives,” says Evan Anderson, a Regional Wealth Planning Manager with Wells Fargo Private Bank in Charlotte, North Carolina.

2. Determine your savings time horizon

Only 28 percent of non-retired investors say they have given a lot of thought to the best age to retire, according to the recent Wells Fargo/Gallup survey. But this is a critical component of developing a written financial plan because that number can influence almost all facets of your plan. Do you have 40 years to build your savings or 10? Your timeframe for saving may influence the risk profile you want to take in your portfolio.

Knowing your retirement age can also help you forecast how long your retirement income might need to last. As a baseline, the average investor may require an 80 percent salary replacement rate in retirement, according to projections from Wells Fargo Institutional Retirement and Trust. But that percentage will differ for every investor, given factors like taxes and earnings potential.

3. Gauge current and future finances

How do you know how much money you’ll need in retirement? Calculating your current budget may help you estimate your future income needs. Don’t forget to consider costs that may increase in retirement, such as health care or travel expenses. Depending on how you want to spend your retirement, your expenses may vary from what they are now.

4. Determine how much to save and how to get there

Once you’ve thought about your retirement lifestyle, projected retirement age, and your potential retirement expenses, you can begin to approximate how much you’ll need to save by contrasting your current assets with your future spending needs.

You may want to start by examining your investment strategy. Your written financial plan should touch on the appropriate asset allocation mix to help meet your goals.

“A sound plan will use conservative assumptions to increase the likelihood that you will achieve your goals,” says Anderson. “If the plan ultimately outperforms the assumptions used, this will be a welcome surprise.”

5. Factor in life’s many changes

It’s important to understand that the process doesn’t end when you craft your written financial plan. Written financial plans are living, breathing documents that you should update regularly.

“As a best practice, clients should review their plans with their advisor at least annually to help ensure that timely adjustments to the plan are made as needed, especially when any major life events occur,” says Anderson.

That’s because some life changes, like landing a higher-paying job or finishing off a loan payment, may allow you to save more down the road. Other life changes may impact your spending patterns or give you a goal to save toward.

“With the financial confidence given by a written plan,” Anderson says, “clients can focus on the things that they are most passionate about in their lives.”

John D. Natale is a business communications consultant with Wells Fargo Bank, N.A.

What can Wells Fargo do for you?

No matter how your life may be changing, your team at Wells Fargo will be glad to help you plan and prepare. Call now.

Wells Fargo & Company and its affiliates do not provide legal advice. Wells Fargo Advisors is not a legal or tax advisor. Please consult your tax or legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

Wells Fargo Wealth Planning Center, part of Wells Fargo Private Bank, provides wealth and financial planning services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries.

Wells Fargo Institutional Retirement and Trust, a business unit of Wells Fargo Bank, N.A., provides recordkeeping, trustee, and/or custody services.


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