sample financial plan

Sample Financial Plan: Alex and Jamie Smith

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A sample financial plan serves as a blueprint for maximizing your money. It will contain your goals, an analysis of your financial situation, and recommendations that will steer you toward financial security and prosperity. 

This blog will give you a tour of what it’s like to work with us to build your comprehensive financial plan. We are passionate about providing our clients the most value by understanding their current situation and financial goals and creating a robust and personalized plan.

We will create a sample financial plan for our hypothetical couple, Alex and Jamie Smith. Please remember that this sample financial plan is purely illustrative and not intended as personalized advice. Your financial plan will be customized based on your circumstances, encompassing factors such as your current resources, goals, return needs, and risk tolerance.

There are five steps in your personal finance journey to maximize your money, answer all your financial planning questions, and plug the gap into what you don’t know, all to reach your goals.

1) Choosing a Financial Planner

Alex and Jamie Smith are in their late 30s and parents to two young daughters. They lead busy lives. Alex is a Senior Product Manager at Microsoft, while Jamie juggles part-time work as a self-employed consultant alongside her family responsibilities.

They have been trying to save for various goals but aren’t sure if they are making the best financial decisions to achieve them. Their portfolio includes a mix of retirement and bank accounts. While they have a general grasp of their monthly expenses and have managed to avoid consumer debt, they recognize the need to optimize their financial standing for the future. 

Their top two priorities are to retire by 55 and to help pay for their daughter’s college.

Alex and Jamie recognize that they don’t have time to research how to maximize their money and that it’s time to hire an expert in their corner. They read a blog on what to consider when searching for a financial advisor. They have established four specific criteria for selecting the right advisor:

  • The financial advisor should work with others just like them
    They want a financial advisor who caters to individuals in their demographic, particularly millennials/those in their 30s and 40s. They believe such an advisor will better understand their circumstances and offer tailored strategies.
  •  A CERTIFIED FINANCIAL PLANNER™ certification is a non-negotiable requirement
    This guarantees that the financial planner possesses the necessary training, expertise, and experience to guide them in their financial planning journey effectively.
  • They must be a flat, fee-only financial advisor
    This ensures transparency and eliminates the potential conflicts of interest associated with commission-based compensation models.
  • The financial advisor must be a fiduciary
    They expect their financial advisor to uphold this obligation, prioritizing their best interests above all else.

District Capital Management appears to be suitable, meeting their criteria as a fee-only financial planning firm catering to professionals and entrepreneurs in their 30s and 40s. They schedule free consultations with three potential advisors, including District Capital Management, equipped with questions to aid their decision-making process. 

The initial free consultation with a fee-only financial planner at District Capital Management

The initial free consultation with a fee-only financial planner at District Capital Management gave Alex and Jamie Smith a valuable opportunity to connect with Kayla Welte, one of our esteemed financial planners. This discovery call aimed to help Alex and Jamie decide if District Capital Management is a good fit for their needs and if we could add value to their financial lives.

During the 30-minute Zoom call, Kayla listened to the Smiths as they shared their financial situation and future aspirations. She then outlined how she can help answer all their financial planning questions through our comprehensive financial planning process. Kayla explained our transparent, flat, fee-only structure and demonstrated how our suite of modern tools could benefit them. 

By the call’s conclusion, the Smiths had comprehensively understood fee-only financial planning, including the value, cost, process timeline, mutual commitments, and ongoing support they could expect. Impressed by District Capital’s transparent and client-focused approach, they decided to proceed with the partnership. 

Becky, our dedicated administrative assistant, promptly facilitated the following steps by sending them the e-contract via DocuSign.

District Capital Management is a fee-only financial planning firm that serves professionals and entrepreneurs in their 30s and 40s. If you want a comprehensive financial plan, schedule a free call with one of our fee-only financial planners today to learn more.


2) The Data-Gathering Process

The Smiths received an invite from District Capital Management to link their accounts to our software, RightCapital. They set up their accounts and linked their bank accounts, credit cards, retirement accounts, and mortgage. This will enable Kayla to do a deeper analysis of their spending and investment accounts and make retirement and college education projections. 

increase net worth financial planning

RightCapital is a comprehensive financial dashboard with military-grade security. The Smiths can later use it as a monthly budgeting tool and to track the growth of their financial net worth over time.

The Smiths also uploaded their key financial documents, including their pay stubs, tax return, list of investment options in their 401(k), and Alex’s employee handbook containing benefits information, via a secure link.

Dig deeper call with the client

After Kayla reviewed all of the documents, she set up a meeting with Alex and Jamie to dig deeper into their financial aspirations. While this meeting is not mandatory, it ensures a more comprehensive financial plan.

During the dig deeper call, they further discussed Alex and Jamie’s primary financial goals, which included:

  1. They both want to retire when they turn 55.
  2. They want to know how they can maximize their retirement savings.
  3. They want to know how to maximize Alex’s RSUs and ESPP benefits.
  4. They want to be able to pay for half of each of their daughter’s college education.
  5. They want to know how to save taxes on Jamie’s consulting work.
  6. They want a $10,000 per year vacation budget, as rest and discovering new places are essential to their family.

Alex and Jamie shared that they don’t really have a budget and sometimes don’t have a grasp on where their money is going. They would like to have more visibility into their finances.

This dig deeper call gave Kayla a clearer picture of the Smiths’ financial situation and goals.
 

3) Creation of the Client’s Financial Plan

Kayla spent hours reviewing and capturing the information from their financial documents. She conducted a thorough analysis of their current financial situation, during which she discovered that:

  • They have a chunk of money sitting in a checking account.
  • Alex has been accumulating Microsoft RSU stock.
  • Alex has not been participating in his company’s ESPP plan.
  • They have a Utah 529 college savings plan.
  • They got a huge tax bill last year.
  • They are not contributing to a backdoor Roth IRA.
  • Jamie is not contributing to any retirement plan.
  • Alex’s current and Jamie’s old 401(k): Some of the investment funds they’ve chosen are in higher-fee, underperforming funds. 
  • They do not have beneficiaries in some of their accounts and do not have a will in place.


Kayla then created 40+ recommendations or action items so they could reach their goals while not leaving money on the table.

She also used our software, RightCapital, to determine how much they need to save towards the right 529 college savings plan to help fund their two daughters’ college. She also used our software to identify critical steps they need to take to retire at 55.

4) Financial Plan Presentation

Current Situation

Kayla presented an overview of their current financial situation. Alex and Jamie have done a great job on these:

  • They have an adequate emergency fund.
  • No credit card debt.
  • Alex contributes to a 401(k) and maximizes the employer match.
  • Their 401(k)s are invested primarily in stocks, allowing them to capture stock market gains over the past decade.
  • They have a good amount of home equity and low mortgage rates.

Next, she took them through a mathematical method known as a Monte Carlo analysis. This simulation utilizes their financial data to model potential outcomes when investing across various market cycles, aiding in assessing the likelihood of running out of money. The analysis revealed a current success rate of 54%, which is the likelihood they can retire at 55 and help fund their two daughters’ college.

>> View a sample financial plan.

Subsequently, Kayla proposed the following strategies to enhance their chances of success and not leave money on the table. She recommended 44 action items, including the following:

Maximizing their cash

  • Invest some of their cash in a Treasury bill, CD, or a high-yielding money market.
  • Implement our Digital Budgeting Envelope strategy to have more visibility on their finances and help them save more towards their goals.

     

Optimizing their retirement planning and investments

  • Switch to Roth 401(k) contributions while they’re in the lower 24% tax bracket.
  • Implement the backdoor Roth strategy to grow more money tax-free.
  • Implement our strategy to maximize Alex’s RSUs.
  • Implement our strategy to maximize Alex’s ESPP benefits.
  • Change the investment allocations in their 401(k)s by choosing lower-cost funds and adding emerging market stocks to increase potential return and diversification.

     

Lowering their taxes

  • Open a SEP or solo 401(k) for Jamie and make contributions.
  • Make quarterly estimated tax payments for Jamie’s consulting income.

     

Funding their daughter’s college

  • Open a 529 college savings plan in their state.
  • Contribute our recommended amount per month to help fund two year’s worth of in-state college expenses. These contributions will also be tax-deductible in their state.

     

Protecting their loved ones

  • Add primary and contingent beneficiaries in all their accounts.
  • Contact our recommended estate planning attorney to draft a will and possibly a Revocable Living Trust.

     

Kayla showed Alex and Jamie how these changes would impact their financial situation. By implementing our proposed financial planning recommendations, the Monte Carlo results increased dramatically from 54% to 95%.

current financial plan
proposed financial plan

Monday.com

Kayla also showed Alex and Jamie how to utilize our modern Financial Plan dashboard to keep track of their progress. This dashboard contains all their 44 actionable recommendations. They can ask Kayla questions on any of these action items through our platform, reducing the need to comb through emails when searching for their to-do list.


5) Ongoing financial planning support

Alex and Jamie will receive ongoing support from District Capital Management to help them implement our recommendations, answer any questions, and refine their Financial Plan accordingly as they change jobs, have new goals, investment opportunities and risks arise, and life evolves.

Alex and Jamie will receive:

  • Zoom meetings with Kayla every four months
  • Unlimited email support
  • Monthly newsletter containing personal finance tips
  • Ongoing investment guidance
  • 24/7 access to their written Financial Plan via Monday.com
  • 24/7 access to the RightCapital budgeting tool
  • Access to our network of estate attorneys, tax professionals, realtors, and many other professionals we have vetted in the Washington, DC, area.

     

The ongoing financial planning relationship

As a member of the District Capital Management family, we will be by your side throughout the journey, offering unlimited email support and one-on-one consultations every four months. We take joy in evolving alongside our clients, witnessing their accomplishments as they reach their financial milestones. 

>> If you’re thinking about hiring a financial planner to help you achieve your financial goals, read our ‘10 Questions To Ask A Financial Advisor’ guide first.

FAQs

A financial plan is a comprehensive document that outlines your current financial situation, goals, and strategies to achieve those goals. It provides recommendations for budgeting, saving, investing, retirement planning, tax planning, insurance, and estate planning. The purpose of a financial plan is to provide a roadmap to accelerate wealth accumulation and achieve financial goals over time.

Financial planning helps individuals and families gain control over their finances, accelerate wealth accumulation, and achieve their financial goals, whether it's buying a house, saving for retirement, or funding education. There are many things you don’t know that you don’t know, and a financial plan will plug all those holes.

Once you hire a financial planner, it typically takes 2 to 3 weeks to develop a written financial plan. The faster you give your financial documents to your advisor and answer any clarification questions, the swifter the process. If your situation is urgent, an efficient financial planner can deliver your financial plan in a week.

Once the written Financial Plan is created, it typically takes 1-2 years to implement most of the recommendations and put things in place. While many action items can be done in a few months, several require a lot of bandwidth from the client. This includes moving an old 401(k) to a new 401(k) and getting a will in place.

While creating a basic financial plan using online resources, working with a qualified financial planner can provide personalized guidance, expertise, and accountability to help you achieve your financial goals more effectively. There are many things you don’t know that you don’t know, and a financial planner will plug all those holes.

Financial plans are typically reviewed annually or when a significant change in your financial situation or life circumstances occurs. Regular reviews ensure that your financial plan aligns with your goals and objectives.

Work with a fee-only financial advisor to build a comprehensive financial plan in 2024

In the tumultuous seas of personal finance, navigating toward stability and prosperity requires a well-charted course. Like a ship requiring a sturdy blueprint to traverse the ocean, individuals need a comprehensive financial plan to sail through life’s uncertainties. 

A sample financial plan serves as the compass, guiding you toward your monetary goals while weathering the storms that may arise. Let’s embark on a journey to explore the components of a robust financial plan and how it can set you on the path to financial success.

If you’re interested in a comprehensive financial plan, schedule a free consultation with one of our fee-only financial advisors today!

Disclaimer:
The account values and investment returns presented in the example financial plan for ‘Alex and Jamie Smith’ are derived from historical market data and should not be interpreted as indicative of future market performance.

It’s also crucial to understand that a financial plan is not a static document. It’s a dynamic document that evolves and requires regular updates and adjustments. It consists of financial models and involves a collaborative relationship with a financial advisor to chart a course toward achieving your evolving financial goals.

Best Financial Planner Washington DC

Alvin Carlos, CFP®, CFA is an investment advisor and fee-only financial planner, in Washington, D.C that works with clients across the country. He has a Master’s degree in International Relations from SAIS-Johns Hopkins. Alvin is a partner of District Capital, a financial planning firm designed to help professionals in their 30s and 40s achieve their financial goals through smart investing, reducing taxes, retirement planning, and maximizing their money. Schedule a free discovery call to learn how we can help elevate your finances.

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District Capital is an independent, fee-only financial planning firm. We help professionals and entrepreneurs in their 30s and 40s elevate their finances and maximize their money. We are based in Washington, D.C and we work with people virtually nationwide.

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