We plan many things in our lives: weddings, vacations, education. The most important planning we do, however, is financial planning. We need a solid personal financial plan to support all those other things.
A solid financial plan helps people manage all aspects of their finances, including income, expenses, spending, savings, investments, and retirement planning. Here are the fundamental steps to building a personal financial plan.
Building a comprehensive financial plan empowers you in all aspects of your life. When you put yourself on sound financial footing, all that other planning in life—like weddings, buying a home, and taking a dream vacation—becomes enjoyable instead of scary.
Our personal financial planning process is designed to let us get to know each other. We believe the success of a financial plan is built on a foundation of trust between a client and their financial advisor. That’s why we strive to learn everything about your current financial situation, your financial goals, and even some things you may not think are relevant but can greatly influence how you make financial decisions—such as your beliefs, attitudes, and values.Read More
Let technology make your financial planning both easier and more powerful. These financial planning tools help you gain a deeper picture of your financial condition.
Required minimum distributions (RMDs) are minimum amounts the IRS requires retirees to withdraw from retirement accounts such as IRAs each year. You can find a free required minimum distribution calculator here .
An emergency fund will cushion you against surprise financial setbacks. These include car repairs, medical expenses, or a job loss. Each individual’s needs are different, so an emergency fund calculator can be extremely helpful in making sure you’re covered for the unexpected. Nerdwallet has a free one available here .
Your net worth is the value of your assets minus the value of your liabilities. If your debts are larger than what you own, you have a negative net worth. Calculating your net worth gives you a valuable report card on your financial situation. Forbes put together a useful net worth calculator here .
Investors have different goals and different possibilities in terms of their assets and how much risk they are willing to accept. Risk tolerance is the degree of market volatility and loss an investor is willing to accept. The University of Missouri website has a useful risk tolerance quiz that can help you find your sweet spot in investing.
Saving money isn’t as easy as just putting it into a savings account. Make sure your savings are growing as fast as possible and track your savings goal with compound interest and savings goal calculators like this free one made available from the SEC.
Understanding the best time to turn on Social Security benefits is essential in getting the most out of your Social Security. Remember, beginning benefits early lowers the monthly benefit amount while delaying retirement past your full retirement age increases the amount. This SEC website offers a free personalized Social Security benefit estimator.
It practically takes a college degree just to plan for college tuition and expenses. Use this 529 Expense Analyzer to assess how fees and expenses can affect the return you receive on various 529 college savings plans.
As people are living longer, the need to prepare for long-term care has increased. Long-term care may consist of home care provided by family and friends, or when intense care is required, it may be provided in a nursing home or memory care community, which can run thousands of dollars per month.
Stan and Kara were a married couple in their late fifties who hoped to retire within the next five years. They owned a home with about 80 percent of the mortgage paid off, had two cars that they owned outright, and had no other debt. In retirement, they hoped to be able to travel and visit their grandchildren who lived in three different cities. Both had 401(k)s through their employers and they had some limited stock investment.
Our challenges included:
In building a new financial plan for Stan and Kara, we:
The only thing you can plan for with certainty is that situations change and you’ll probably need to re-plan. We continued to meet with Stan and Kara regularly for annual reviews of their progress and reassessment of their financial situation. That became essential in 2017 and again in 2020 when Congress made substantial changes in the US tax code.
Stan and Kara were able to retire comfortably on schedule and pursue their travel plans. We still meet periodically to make sure their plan is on track and to discuss and execute ongoing tax planning and investment strategies.
Planning your finances involves creating a budget, tracking expenses, saving consistently, investing, and setting financial goals. People should also consider debt management, building an emergency fund, learning tax strategies, and planning for retirement.
Financial plans should receive regular reviews and adjustments, and seeking advice from a financial planning professional is recommended.
The 50/30/20 rule is a budgeting guideline suggesting how to allocate income after taxes, with
This rule is meant as a general framework and should be adjusted to fit each individual’s specific circumstances.
The cost of a personal financial advisor varies depending on location as well as the advisors’ experience and the services they provide. Financial professionals also charge in different ways:
Many advisors base their fees on assets under management, a range of 0.5 percent to 1.5 percent per year. Others charge a flat hourly fee that may range from $200 to $500 per hour.