Financial Needs Analysis

Financial needs analysis refers to the study of an individual’s current and future financial condition. Here, the sole purpose of FNA is to analyze and evaluate a person's financial situation from all angles and provide a strategic financial plan to match the individual's needs.

Most financial planners use the FNA template to understand the unique aspects of a person's or family’s financial condition. It creates a clear picture of current financial status and how it can be improved to achieve retirement goals. However, proper evaluation of each income component can further help in developing an effective financial plan.

Financial needs analysis is an evaluation process of the financial needs of an individual or family and developing a plan to match the goals. It acts as a tool to provide an overview of the financial condition by considering past and future needs. Any visible gaps can be enhanced with the help of a financial advisor. They in-depth study your current financial status (like income, savings, investments, and expenses) and then devise a plan accordingly. This financial needs analysis worksheet acts as a base for further financial planning and analysis (FP&A). 

Before planning to deploy FNA, it is necessary to consider certain factors. It includes income analysis, risk tolerance level, expense assessment, debt review, and financial aspirations. Only after successful assessment of income earned on par with the expenses helps in determining the deficit created in the budget. Additionally, financial planners consider any mortgage or loan taken in the due course and how it matches with the individual goals set initially. However, a financial needs analysis template created by certified planners should not be confused with FP&A. 

While financial planning and analysis and FNA run closely together, they have a minor difference between them. FP&A is a set of processes designed to assess the financial health of a company or firm. It helps an organization plan, budget, and forecast to align with the major business decisions and the firm's future financial health. 

Financial needs analysis includes various components that help financial planners decide the meter of financial health. Let us look at them in brief:

• Income and assets: Advisors do consider the amount of income earned on a consistent basis. Additionally, any assets owned by the individual also add to the wealth. With FNA, it is possible to understand the sources that drive the monthly needs of a person. Likewise, any disposable income can create a scope for investment as well. 
• Debt and expenses: More than income, expenses decide the success or failure of a financial plan. Achieving the financial goals can be tough if the expenses exceed the budget. The same formula applies to debt and liabilities. For example, suppose a person has enough money to pay bills or any loan taken. If there is any high-interest debt, it can drain the financial resources greatly. Hence, FNA helps assess financial stability and health (via debt-to-income metric). 
• Financial goals: In the same context, an individual's financial goals also act as crucial to FNA. Understanding a person's short and long-term goals can help determine their future financial strategy. These goals can include retirement health insurance, long vacations, children's education, house purchasing, and others. Although they vary from person to person, each goal must have a target to be achieved within a certain time frame. 

Analyzing a financial condition can be easy, but somehow complicated to conduct the same. Following are some detailed steps to understand how individuals can optimize their finances with FNA:

• Develop a personalized approach: The foremost step in the FNA process is to go for a customized financial approach. Since everyone has different financial goals to achieve, the same rule does not apply to all. Likewise, the risk tolerance level also differs. Therefore, it is important to have a personalized approach to developing effective solutions catering to individual needs. 
• Assess financial health: This step involves a detailed, comprehensive view of a person's finances. It also covers income, expenses, and investments made until now. In other words, it acts as an indicator of one’s financial matters. 
• Look for gaps: While assessing finances, financial planners may come across gaps that disrupt the entire journey of acquiring financial goals. Here, they can create a financial needs analysis sample stating the potential solutions for the loopholes noticed. 
• Establish clear and definable goals: Once an advisor has successfully examined and evaluated all angles, they can move the financial needs analysis sample to a final one. At this stage, they can mention clear goals which can be achieved in the next few years. However, the goals established should not be unrealistic and seem impossible to achieve. 
• Review and update when necessary: Lastly, it is crucial to set checkpoints for constant reviewing and updating the plan, if necessary. It helps in client retention and helps them achieve their desired objectives. 

Let us look at examples of how financial planners use financial needs analysis templates to help clients get closer to their aspirations:

Example #1

Suppose James is a salesperson who has been in this field for more than a decade. Also, he recently got married to Jess. At this point, he has multiple expenses and a new home to buy. However, with a salary of $12,000 annually ($1000 monthly), he is confused about how to navigate the expenses down to savings and, ultimately, investments. Therefore, James consulted Kevin (financial planner) for this problem. 

Kevin first understood his financial needs and, later, his current expenses and debt. Accordingly, Kevin told James to fill out the financial needs analysis worksheet and create a financial plan. This plan had a clear roadmap to help James achieve his dream house in the next three years. 

Example #2

According to the news published in September 2024, the Shares Foundation has enabled an investigation for investors who primarily invested shares in Primerica Inc. Due to some breaches and wrongdoings by certain directors and officers, there is potential harm over their fiduciary duties and damage caused to investors and Primerica's financial needs analysis company as a whole. 

Even in April 2024, a Bear Cave report mentioned the extensive evidence of the fake figures projected by directors and how the highest producing agents of Primerica financial needs analysis corporation are engaged in misleading and inappropriate conduct. 

FNA serves as an important metric for individuals planning to achieve their financial goals quickly. It helps analyze each aspect of finances and think of a solution to boost the journey. Taking time to look at income, expenses, and liabilities can help in understanding the current situation and where you stand. With the right knowledge and apt advisor, individuals can take the right decision for building a stable future. Also, a detailed financial plan developed with an advisor can prioritize spending and divert funds for established goals.