Posted on February 26, 2015 in ,

Make 2015 the Year for Financial Planning

A new year is here and a bright future inspires many resolutions, and if you haven’t already done so, make 2015 the year to get your financial house in order.  As the newness of 2015 slips away, I am reminded of a line by John Lennon, “Life is what happens while we are making other plans.”  Financial planning may seem like a daunting task, but it really parallels the structure of a fitness program.

The first step is an honestly assessing where you stand financially.  What are your assets and where are they located?  Did you make a savings goal last year to maximize your 401k?  Do you have an updated will?  Do you have a power of attorney?  What debts do you have and to whom? Are your beneficiaries correct on your accounts?  Are you properly protected and insured from unexpected events?  This is the financial equivalent of seeing your physician before starting a fitness program.  You have to know where you are before you can develop a roadmap of where you are going.

The next step is to determine and write down your goals and values which requires dreaming about your future.   If you don’t have the desire or your goals don’t really tie to your values, you are unlikely to pursue them for the long term.  It is critical that you think about what is really important to you including the value of money and your lifestyle needs.   Common long term goals are to be able to retire comfortably, to help children or grandchildren receive a college education, to travel, to start a second career or do volunteer work.  Shorter term goals such as a new car, family vacation, home renovations or a second home should also be included.  Everyone’s goals will be different; dreams and visions are as unique as the individual.  Once you have identified where you want to be versus where you currently are, the planning part is a matter of plotting the course from one point to another which often includes saving more money.

Just as you may hire a personal trainer or fitness coach, you may need a planner to help assist you in developing and monitoring that plan.  Make sure you find a professional who is a true fiduciary and one who makes recommendations that are always in your best interest, not someone selling the product of the week.  This professional should assist you along the way and will work with you in putting all the pieces together.  When people think of financial planning, they often think of investments, insurance, or cash flow analysis.  Those may be pieces of a financial plan, but by no means are they themselves a financial plan.  A disciplined savings plan, estate planning, debt management, income taxes and education funding also come into play with a financial plan.  If you only focus on one or two of the pieces, you may not achieve the goals originally developed in your plan.

Life rarely works out exactly the way you originally planned.  Financial planning is a process, not a destination.  The things that were important early in life might not be as important now and thus your plan will change over time.  It’s not something that is done once and put on a shelf; it is adjusted as life dictates.  Remember, you are a moving target and so are finances.

Similarly, just thinking about exercise won’t make you fit; a financial plan without specific action steps won’t get you where you want to go.  2015 should be the year you make a plan for life before life happens while you’re making other plans.

Source: Inspired by article from Bryon Gragg, CPA/PFS

Next time:  Successful Family Communications for Wealth Transfer