Wealth Management Services


Wealth Management Services

Financial Planning


The Financial Planning Process

If knowledge were indeed power, then perhaps the most powerful knowledge you could have would be self-knowledge. PSM’s, approach financial planning as nothing more than a lifelong process of updating certain aspects of your self-knowledge. While planning for and reacting to life events is often more art than science, through financial planning we can at least try to deal with the quantitative aspects of some possible scenarios and their consequences.

Navigating competently through the life stages of employment, marriage, home ownership, parenting, eldercare, divorce, retirement and ultimately death -- and all the stops in between -- requires knowledge acquired through continual self-education. The conscious management of your financial circumstances, however modest they may be from time to time, will enable you to anticipate opportunities and prepare for contingencies. This approach should give you better choices when life's inevitable events, adverse or otherwise, occur.

We begin by helping you determine where you are now -- your starting point in your quest for self-knowledge! Then we'll encourage you to decide where you want to be, helping you to define goals and objectives for the future. The next step will be developing a road map for getting from Point A to Point B. Then it's on to the details of the planning process: investing, managing risk and insurance, handling debt and credit, understanding the all-important concept of the time value of money, and planning for your retirement and your estate.

The Plan

We all know that the time to prepare for a rainy day is when the sun is still shining. Because you're reading this, chances are good that you've taken the first step.

Common sense tells us, even in the best of times, that at some point we'll have to prepare for the inevitable slowdown. What's more, even if our economy is doing well on a national basis, there's no guarantee that the local economy in your area will follow suit, or that your personal economic conditions won't be subject to ups and downs due to individual circumstances.

Through a simple financial planning system, we'll guide you through the basic steps to allow you to create your own individualized financial plan to help smooth out the hills and valleys on your journey to a secure future:

Your Starting Point

A journey of a thousand miles may begin with one-step, but chances are that you won't know what direction to walk in unless you first know where you're starting. This may be something that you would just as soon avoid. Maybe you would rather not think about the money you know you should have saved, but didn't, or about some of your investments that haven't turned out as planned. In addition, even if you are satisfied with your saving and investment performance, looking to the future certainly seems more fruitful than dwelling on the past.

While any plan to maximize your wealth will primarily focus on the future, you cannot completely ignore your financial past. Even if you don't have to make major adjustments in how you handle your personal finances, you'll need to have an accurate picture of what your finances are now, if for no other reason than to gauge how much more money you'll need to meet your various financial goals.

Therefore, how do you answer the question: "What do you have now?" We suggest that you follow this three-step process:

Inventorying Your Assets and Liabilities

The first step in the process of determining what assets and liabilities you now have is to create an organized list of them.

Rest assured, we wouldn’t be asking you to do the type of detailed, whole-house inventory that you might do in connection with your homeowner or renter's insurance policy, or a list of your financial obligations that might satisfy your banker. We are not interested in the serial number on that electric shredder, or the $50 that you still owe your sister-in-law!

Your financial planning asset inventory will list the major assets that you have, their value, and what income (if any) they generate. While personal effects such as clothes, electrical appliances and furniture will be listed, or at least lumped together and reflected under a "personal effects" entry.  The emphasis of such a list is on your investments, that is, assets that you hold with a view to their likely appreciation in value (such as real estate or collectible coins or stamps) and/or generation of income (such as stocks, bonds, CDs, or rental real estate).

Listing your assets.

Because you'll use the information derived from your asset inventory to analyze and possibly realign your investment strategies, you'll want the entries for your investments to be fairly detailed. You'll generally want to include an entry recording when each investment was made, its purchase price, its estimated current market value, and the amount of yearly income that it earns (if any). If you are married, you should also note whether each asset is owned by you alone, or jointly with your spouse. If you like, you can also list assets owned solely by your spouse to get a more complete picture of your family's financial situation.

Building Your Budget

The pain of budgeting can come from two sources: the time and effort needed to start and maintain the budget, and the financial sacrifices that may be necessary to put the budget into force. It would be nice if we could say that you'll be able to reach all of your personal financial goals without making some current sacrifices. This would be nice, but it's probably not possible for most of us. If it were so easy, everyone would have attained financial security.

A personal budget is a tool to help you to reach your personal financial goals. It is intended to be an organized way to compare income and expenditures over a relatively short period (a week, month, or a year). It should allow you to forecast your income and expenses, monitor your progress, and make changes as needed to achieve your goals.

The idea of a personal budget means different things to different people: at its most informal, someone might think of a budget as merely living within one's means. That is, if you haven't completely run out of money by the end of the month (or whatever measuring period you use), you have stayed within your budget. While we are all for simplicity, such a "budget" is really no budget at all, because it doesn't give you any information about where your money went, and it doesn't provide the structure and discipline conducive to making changes where necessary.

Whatever the form your personal budget takes, it should give you a detailed picture of how money comes to you, and how you spend it, within the reporting period you choose. We recommend that you choose a reporting period that gives the most accurate picture of your financial cash inflow and outflow. For most of us, this would be monthly, since the majority of personal obligations are usually billed monthly. After you've selected your period, you're ready for:

Assembling Documents

While you may want to write on a clean slate when constructing your life's financial plan, you should consider the affect that existing legal documents and arrangements may have on those plans.

Some of these arrangements may be readily changeable, such as most wills and trusts. Others, such as contracts and marriage dissolution agreements, may be difficult or impossible to amend. Still others can be changed if you're willing to pay some kind of penalty or fee, such as variable annuities, or mortgages that can be refinanced.

Your existing legal arrangements can affect your current and future financial position in several ways. Some of these arrangements have their primary impact on your current cash flow situation. If a current legal obligation requires you to pay out money (for example, an agreement to pay alimony), you'll have to keep paying out this amount until the obligation is satisfied. Thus, you will have less money to use for other purposes. Other legal arrangements may primarily affect how you will dispose of your wealth at death. Will and trust documents are good examples of these.

Your first task is to locate and organize any documents and other evidence of your legal obligations and relationships. Once you have done this, you'll need to make sure that you account for these arrangements wherever they would be relevant to your life planning, wealth-building and wealth-distributing (at your death) plans.


Disclosures:  See Performance webpage for performance information.  The existence of this website should not be construed in any manner as a solicitation for advisory business or securities business in any states beyond the states Portfolio Strategy & Management, Ltd. maintains registration. Information associated with this website is believed to be accurate, however, Portfolio Strategy & Management, Ltd. makes no guarantee to this fact and has no control over the accuracy of websites found through the links within. Investments in equity, bond, commodity and other markets have risk of loss. Investment research strategy examples and past returns are for information only and are not necessarily indicative of future investor returns. Registration as an investment adviser means that a principal of the firm may have passed the FINRA series 65 examination and that the firm registered with and is subject to the rules and regulations of the state regulatory authority or the SEC.  It does not imply a government recommendation of the advisory firm.