The Financial Planning Checklist: A Powerful Financial Planning Tool

Imagine you're going on a week-long vacation next year and I came to you and said, “Hey, we need to start thinking about packing for that vacation next year.”

You’d think I was crazy. You’d say to me, “That vacation is a year away. I’ll pack a day or two before the trip.”

If packing for a vacation a year in advance is difficult, imagine how difficult it is for your clients to plan for their “vacation” called retirement, 30 – 40 years in advance.

Vanguard conducted a study on how America saves in 2022, and the median household retirement savings for people aged 45 – 54 is $61,530. It's nowhere near enough. It highlights the challenges of planning and how ill-equipped most individuals are to do it on their own.

As a financial professional, you recognize that the decisions someone makes in their 30s and 40s have a dramatic impact on the quality of their retirement. However, these decisions are not felt until 30 - 40 years down the road.

Your role is to help bring the future to the present and create a sense of urgency for planning. This is an important topic to be discussed with clients. A tool that can be helpful to reinforce your message and create urgency is a financial planning checklist.

How To Create And Use A Financial Planning Checklist

I used a financial planning checklist extensively during my 12 years as an advisor. Quite simply, it worked. People love visuals.

At the end of a planning meeting, I'd produce a one-page checklist for my clients. The checklist would show the things they needed to be financially secure.

My checklist had approximately 11 boxes including having adequate liquid cash, funding retirement, funding education, and having a will.

I would show them where they would be on the checklist if they follow my recommendations. I would also show them where they currently before any action had been taken.

This visual helps them understand that, even if they were to do everything that’s currently recommended, there's still much work to be done before they can ultimately achieve financial security.

With the checklist, clients can easily see the complete vision for your plan. They also see that getting a check in every one of the boxes on the list equates to a 30- or 40-year journey. It’s your job to put your arm around them and walk side-by-side on a relentless pursuit to check off every single box.

I like to use this checklist for all the reasons I’ve stated, and for my annual reviews, to demonstrate the progress we're making together each year and to illustrate that there's light at the end of the tunnel.

A Process Based On Prioritization

The checklist is also a tool that can guide the conversation about prioritization. When clients look at the checklist, it doesn’t take them long to figure out that reaching total financial security right away is almost impossible.

As a financial professional, you recognize that the decisions someone makes in their 30s and 40s have a dramatic impact on the quality of their retirement.

There are too many things that need to be done. It’s going to take time. However, the question remains of where to start.

For example, let’s assume you create an individual plan where it’s necessary that they:

Invest in an additional $1.5 million of life insurance
Buy $4,000 a month of supplemental disability insurance
Save $750 a month for their child’s education
Save an additional $1,000 a month for retirement

Even without considering the cost of the disability or life insurance, they would need to save an additional $1,750 per month for their education and retirement goals.

However, you know based on their income and preliminary conversations that their budget today allows for an additional savings of $500 a month at best.

This can be overwhelming for clients and an obstacle to taking action without your guidance. It’s at this point you must have a conversation where a big role you play as the client’s advisor is to help them prioritize their planning.

From my planning philosophy, I believe we must take care of risk management first, before wealth accumulation. In this situation, this means that the client needs to address the $1.5 million in life insurance and $4,000 per month in supplemental disability insurance right out of the gate.

If we accomplish this in the least expensive way, we may still have some additional capital for retirement planning or education planning. I would emphasize the retirement planning piece, simply because you can’t take out a loan if there’s a lack of retirement funds.

A Financial Planning Checklist Brings Clarity

In order to be the best financial professional possible, it’s critically important that your communication always follows the three Cs; it’s clear, concise, and compelling.

The financial planning checklist is a tool that makes planning more understandable for your clients. It will also help keep you on track with the most important aspects of your plan and how different goals are prioritized.

You can download my sample financial planning checklist below. I encourage you to use this to create your version of it and really make it your own.

I guarantee that when you start using these in your planning meetings and annual reviews, your clients will see you as more professional. It will help motivate them with a greater sense of urgency. And it will help you develop a transformational partnership with your clients on this lifelong financial planning journey.