Goals Based Approach to "Personal Financial Planning"

LIFE'S MANY GOALS
  

Cash Flow vs. Goal Based


Most financial planners follow the “detailed cash flow” method of planning. At Anthony V. Rizzutto, CPA/PFS we utilize a different planning approach. Our method is “Goal Based” personal financial planning. It provides a superior plan at a much lower cost to you.

Detailed Cash Flow

Those planners who champion the “detailed cash flow” method create a detailed cash flow for their clients, and extend it many years into the future. So, advisors create many assumptions – predicting clients’ income for the next 20 years, estimating their expenses in each of those years, and making assumptions to estimate the taxes they’ll pay each year. The only thing we know for sure is that most of these assumptions will be wrong. No one can predict that level of detail so many years into the future. More data does not make a plan more certain or more accurate. It actually makes the end result less meaningful because of all the assumptions made that most assuredly will prove to be inaccurate.

The greatest weakness of the “cash flow” method is the cost to produce the plan. You, the client, pay for all the detailed analysis.

Goal Based Planning

Noting the inherent weakness in the “cash flow” approach discussed above, we at Anthony V. Rizzutto, CPA/PFS have embraced the “Goal Based” approach to “personal financial planning”.

“Goal Based” planning focuses on the most significant factors. Since no one can guarantee the accuracy of any assumption, we limit the number of assumptions to those that are the most reasonable to predict. Focusing on what you can save, and relating that to your current lifestyle is more reasonable than trying to predict your actual income and expenses for the next 30 years.

We focus on your vision of retirement, your needs, wants and wishes. You are assisted by us in identifying specific goal and there relative importance to your quality of life. Next, the cost of each goal is determined. Then your savings and other retirement income sources are balanced against the cost of your goals. If savings and retirement income meet or exceed the cost of your goals We All Shout for Joy; the planning process is successful.

If, on the other hand, the cost of your wants and needs are greater than your savings and retirement income we need to find ways to balance your goals with your ability to save and generate retirement income.

The first step is for you to prioritize your goals into "must have" and "would like to have" categories. Are there goals that can be eliminated or reduced in scope? Do you have the ability to save more?

We work together to select the best combination between your goal selection and your ability to save until the "scale is balanced" or tilted in your favor.

Personal Financial Planning is an on going process of making subtle adjustment as more and better information is available to you.