The 2008-09 financial meltdown is a stern reminder that failing to plan for low probability events may lead to detrimental consequences.

The best way to avoid a similar fate is to create a flexible and comprehensive financial plan today.

According to the Certified Financial Planner Board of Standards’ 2004 Consumer Survey, most Americans lack a formal financial plan. Yet the same survey finds those with a written financial plan are more satisfied with how their finances are managed, more confident about their financial decisions, and less worried about being financially secure at retirement.

Deciding where to invest your money is only one part of a comprehensive financial plan. You also need to consider asset protection strategies, liability management, cash flow analysis, and tax minimization strategies.

A good plan will address questions such as:

• How much do I need to save so I can retire with my desired lifestyle?

• What percent of my portfolio can I withdraw each year?

• Which assets should I tap first in order to minimize my taxes?

• What is an appropriate investment mix based on my goals and tolerance for volatility?

• What insurance do I need to protect my assets?

• How can I ensure that my assets pass to my heirs in the way that I desire?

• What plans do I need to help me realize my special dreams and goals?

And, don’t forget, this is not a static document. As your life changes so should your plan. Here are several examples of life changes that may cause a revision to your plan:

• The need to take care of an aging parent

• Divorce or death of a spouse

• A forced retirement or job loss

• An inheritance

Of course, there are other transitions, both expected and unexpected, that could occur. The way to deal with them is to have a plan that covers the expected while being flexible enough to deal with the unexpected.

Like a compass, your financial plan keeps you pointed in the right direction even as your life inevitably changes. What’s more, the comprehensive nature of financial planning should help you avoid major mistakes.

By presenting a broad view, your financial plan helps you understand how each financial decision affects other areas of your finances. For example, suppose you receive an inheritance and use it to pay off your mortgage. That frees up more of your earnings to put into your retirement plan. But, your taxes rise because you’ve lost your mortgage interest deduction, and your expanding net worth means estate taxes could become a problem.

Yes, developing a plan takes time, but the end result may help put you at ease and enhance your quality of life.

As Yogi Berra once said, “If you don’t know where you are going, chances are you will end up somewhere else.” Better to live your life by design, not default.

Contact Tom at 1030 Seminary St., Ste. D, Napa, CA 94559, 254-0155, fax 254-0158 or e-mail suntrm@aol.com.