What Is a Financial Plan?

A financial plan describes your current money situation and your financial goals, as well as strategies to achieve those goals. It's easier to follow- and easier to achieve your goals- if you have a plan to get there!

Note: Write down all of these parts. It will help you remember your priorities when making financial decisions. People who write down their ideas & objectives are 140% more likely to achieve those goals! 📜

1. Goals: Write down your top 3 short-term financial objectives, and your top 3 long-term financial objectives ✔️✔️✔️

   • Be specific! “Pay off car loan by November 2023”, not “reduce debt”.

   • Short-term is 0-5 years. Long-term is 5+ years. You can add in very short-term (0-6 months), or medium-term (2-5 years) categories, too.

2. Current Budget 📈 📉

   • List income and "outgo". Update this yearly or whenever a major life event happens.

   • Refinance Your Finances if necessary- find extra money in your budget- reduce expenses, reduce your tax burden, increase your take-home income.

   • I know TurboTax is great! But if your financial situation is at all complicated- divorced with kids; gig economy worker in the household; own a business, home, or stock options; have retirement plans; etc- then paying an accountant to do your taxes, and give you tax advice, can save you thousands per year.

3. Debt 💳

   • List all debts- including the ones already in your budget. List the amount of each debt, its minimum payment, how much extra you can currently put towards each, and the month/year in which you intend to pay off each debt.

   • Speak with a credit specialist to help repair poor credit. Poor credit can cost you thousands of dollars in interest over your lifetime, and each dollar you save will be a dollar you can put towards your future.

4. Safety Net 🚓 🚑 🚒 😊👍

   • What vehicles do you have in place, when life throws you a curveball? This is where you review your emergency fund and insurances. You may or may not need home, auto, umbrella, life, disability, and/or long-term care insurance. Modern insurance products can bundle life, disability, and long-term care insurance using programs like Living Benefits (sometimes called Accelerated Benefits).

   • List the insurance policies you have in place, and their amounts. Also list the desired amount you want to have in your emergency fund, how much you’re saving towards that desired amount every month, and the month/year you’ll have that amount in your savings account. If you have correct/adequate insurance, your cash emergency fund can be smaller. With less insurance, you need to save up more cash so you won’t be in financial distress when those curveballs happen.

   • Speak with several insurance professionals in different categories- property & casualty; life; and health- to find true experts you’ll be comfortable working with.

5. Saving 💰

   • Cash savings are usually held in a bank’s savings or money market account, and will be used for short-term, finite goals that still require planning ahead- a new computer, a new car, down payment on a home, foreseeable home repair, or a wedding.

   • List each item you want to save up for; how much per month you’ll save for each; and the month/year there will be enough in your savings account for that item.

6. Investing 💹

   • Long-term financial goals often require the magic of earning compound interest in order to achieve them. This includes big goals, like saving for retirement, leaving a legacy for your children, and saving for your children’s education.

   • List each investment goal, and how much you will save for that goal each month. Online tools or finance professionals can help you determine the correct amount to save each month.

   • Speak with several financial professionals, and learn as much as you can, before pulling the trigger on an investment plan; you know your family’s needs better than anyone, so take your time to ensure that a proposed plan really makes sense to you.

7. Giving 👐🏻

   • Short-term and long-term giving objectives are listed here, as well as in your budget. Long-term objectives may include leaving a legacy gift in your will.

8. Estate Planning 🏡

   1. Create a will, financial power of attorney, and medical power of attorney.

   2. Keep all your financial information in one place- if/when something happens, those taking care of you will need all that information and you’re giving them a huge gift by not making them hunt down each piece of information.

   3. You don’t need to work with an attorney on this, especially if your estate is simple. But again, if your financial situation is at all complicated, you will save time (and money!) if you do, plus you’ll have a plan tailored to your circumstances.

Your final step is to go back to the Budget part of your financial plan, and double-check that it includes a category for each of your short-term and long-term goals, like “extra car payment”, “retirement”, and “college funding” ✅

Many professionals exist to help you as you build your financial plan- you are not alone in trying to create the future you want. Having a written financial plan makes it far more likely for you to achieve your goals 😀

Now That’s Smart Money! 🧐