Client goals, household cash flow and planning process
Begin with the client’s goals, household circumstances, resources and constraints rather than a product. Agree the engagement scope, responsibilities, compensation and information needed. Financial statements describe different things: a balance sheet is a stock of assets and liabilities at a date, while cash flow records income and expenditure over a period. A valuable but illiquid home cannot automatically pay next month’s bills.
Translate goals into amounts, dates and priorities. Separate essential spending, discretionary spending, debt payments and saving. An emergency reserve depends on actual obligations and uncertainty, not a universal number of months presented as a guarantee. Check whether a planning ratio uses gross or net income, includes debt principal and reflects the same period in numerator and denominator.
Retirement planning includes nonfinancial preferences such as work, housing, family, care responsibilities and meaningful activity. Discuss alternatives and explain tradeoffs without assuming that the financially largest account is the only important goal. Present recommendations with assumptions, arrange agreed implementation and review the plan when facts change. A recommendation is not complete merely because a form is signed or an investment is purchased.