What is a Long-Term Financial Plan?On this page you will find a definition of long-term financial planning and well as answers to other frequent questions about what a plan is.
A Long-Term Financial Plan is:
- A combination of technical analysis and strategizing. Long-term forecasts and analysis are used to identify long-term imbalances. Then, financial strategies are developed to counteract these imbalances.
- A collaborative and visionary process. A plan does not just forecast the status quo into the future. It considers different possible futures. It also involves other stakeholders. Elected officials, operating departments, and the public can all help identify financial issues, develop consensus strategies, and ensure a successful implementation.
- An anchor of financial sustainability. A plan develops big-picture and long-term thinking among elected and appointed officials.
Other Frequently Asked QuestionsQ. What is the time horizon of a financial plan?
A. Most plans cover between five and ten years. Some plans have certain components that take a longer view. For example, a plan may include a 20-year forecast of facility needs. Key is to match the time horizon with the time horizon of the financial issues most important to the community.
Q. What funds are considered?
A. A plan could consider a range of funds, but beginners tend to limit themselves to fewer funds. In any case, the plan must include the funds that are relevant to the most pressing issues the community faces. For example, if street repair is a big issue, then the street repair fund must be included.
Q. How often is a plan prepared?
A. A plan can be prepared annually or as-needed. Annually is ideal so that the plan can act as prelude to the budget process and contribute a long-term perspective to budget deliberations. A hybrid approach is also a possibility, where a plan is prepared annually but more sophisticated elements are only undertaken every few years. For example, perhaps an extensive citizen survey is only done every few years.
Q. What is in the plan?
A. The essential elements of a plan are an analysis of the financial and economic environment, long-term forecasts, debt analysis, and financial strategies. A financial plan should also be complemented by financial policies.
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Why is it important to do regular financial planning?