---
title: 7 Components of a Good Financial Plan
description: A good financial plan should be fully customized. What is important to you may be less important to others.
image: https://blog.birchwoodfp.com/hubfs/AdobeStock_378475221_ccexpress.jpeg
---
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# 7 Components of a Good Financial Plan
[Rachel Infante, CFP® CSRIC® CDFA®](https://blog.birchwoodfp.com/author/rachel-infante-cfp)
Apr 7, 2022 7:15:00 AM
While not always a popular topic in households, discussing finances plays an essential role in almost every decision we make. Readily planning for the future helps create a financial road map that we can look to when we need guidance or accountability.
**What is financial planning:**
Financial planning is an ongoing process that helps [define, design, and implement one’s financial goals](https://info.birchwoodfp.com/download-the-getting-organized-guide). Financial goals can include many different goals such as:
- Buying a car
- Buying a home
- Saving or paying for college
- Saving or paying for a wedding
- Having children
- Paying off debt
- Saving for retirement
Goals are structured either for the present or future, like retirement. Financial planning helps you assess goals and decide which goals have the highest priority. Our goals aren’t always consistent, so a good financial plan will grow and adapt to changes.
**So what makes a good financial plan?**
A good financial plan should be fully customized. What is important to you may be less important to others. However, there are common recommendations financial advisors will have:
1. **Do you have an emergency fund?**
This savings account typically holds 3-6 months worth of expenses and is purely used for emergency purposes. In other words, it stays liquid and remains steady.
2. **Do you have high-interest debt?**
Certain types of debt take precedence over others when it comes to paying them down. Typically, mortgage and auto loans have much lower interest rates than credit cards. High-interest rate debt should always be the main focus when determining how to spend your discretionary money best.
3. **Do you have specific financial goals that have a shorter time horizon? ****
**These goals might include a wedding or a home purchase. Reallocating some of your savings in the short term to help cover these types of goals can be wise.
4. **Do you have other long-term goals?**
You may have college costs in the future if you have children. Maybe you plan to take your elderly parents in or help with their care costs. The most common long-term goal is retirement planning. You want to make sure you keep this goal a priority so that the need-to-work becomes more of a choice-to-work in the future.
5. **Are your investments adequately allocated to meet your objectives? **
Are your investments properly diversified? Do you have too much or too little risk in your investment portfolio? This is an important component to consider and consistently review.
6. **Are there any tax strategies or opportunities you could be taking advantage of? ****
**Sometimes minor adjustments to how we spend or save money can positively impact how much we pay in taxes.
7. **Does your income and spending account for your goals regularly? ****
**Frequently it’s helpful to create savings buckets for the short, medium, and long-term goals. Treating our savings buckets like a fixed expense helps create consistency and accountability with our spending.
It’s helpful to [sit down with a financial advisor](https://www.birchwoodfp.com/our-team) to help talk through goals that are specific to you. Typically this meeting helps to create a comfortable and achievable roadmap for your financial goals.
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Topics: [Cash Flow and Budgeting](https://blog.birchwoodfp.com/topic/cash-flow-and-budgeting), [Rachel Infante](https://blog.birchwoodfp.com/topic/rachel-infante)
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