Financial Planning Starter Kit

July 22, 2019

For some people the thought of financial planning can be overwhelming.  They may have heard of financial planning but have no idea where to start.  Often, the motivation to begin the financial planning process is a desire to get one’ financial life under control.  As result, they may undertake a step or two, like increasing retirement savings, or paying more against their debt, without making a comprehensive plan.

A basic financial plan does not need to be any more elaborate than some financial goals written on a piece of notebook paper.  You can then expand your plan by adding timeframes and strategies to pursue your goals.  The most common are buying a new home, funding college, paying off debt, or accumulating or managing a retirement nest egg, but any goal you have can be added to your plan.  Once the plan is established it must be reviewed periodically both to track progress and to adjust for changes in your life such as marriage, the birth of a child, job loss or retirement.

As you expand your financial plan, you will gather and organize your financial records.  You can’t have an accurate, useful plan without know what you have.  If you have not done so already, this is a good time to establish a filing system.  Once you have your statements gathered, make two columns on your financial plan, one for assets and one for liabilities.  In the asset column put the value of the things you own, like your house, savings and investments.  In the liabilities column put the amounts that you owe, such as your mortgage, car loans, credit cards and student loans.  When you subtract the total of the liabilities column from the assets column, you have your net worth.  This is your starting point.

The next action step in your financial planning is to establish an emergency fund.  The value of this fund should be equal to about three to six months of your living expenses.  This money should not be invested in stocks or bonds.  It should only be in a savings account or money market account or very short term CD. 

Next you will establish a spending plan.  The goal is to balance your income with your savings and spending.  Pay yourself first by putting money into both long-term and short-term savings.  Long-term savings are things like 401(k)s and IRAs and short-term savings are things like savings accounts and CDs for emergencies or for shorter goals like Christmas presents or a vacation.  Next list the things you need to pay each month like rent or mortgage, taxes, insurance, gas and electric, clothing and food.  After that you can plan for the extras like cable, eating out, and other entertainment.

Once you have your basic monthly spending accounted for, you can put a plan together to reduce or eliminate your consumer debt.  Begin by paying extra on the debt with the highest interest rate.  When that account is paid off, add the full amount of that payment to the next card until you have them all paid off.  Make a plan to pay off your mortgage early.  By adding just a little extra to your principal payment each month, you can shave years off the time it takes to get your house paid off. 

Your next step is to create four key estate planning documents: a will, a financial durable power of attorney, a living will and a health care durable power of attorney.  A will establishes someone to handle your final affairs, distributes your assets and names a guardian for your minor children.  A financial durable power of names someone to handle financial tasks for you when you are unable to.  A living will is a written statement detailing your desires regarding their medical treatment when you are unable to express your wishes. A durable health care power of attorney appoints a person to make health care decisions on your behalf.

Finally, make sure you have the proper insurance to protect you.  You will want to examine your coverages for your home and auto, personal liability or umbrella, medical, disability, long-term care, and life insurance. 

Completing these steps may help you get your financial life under control and help you to pursue the lifestyle you want.  If you have any questions, we would be happy to hear from you.  To hear the podcast of the Smart Money Management radio show on this topic, or others, go to our website at

 The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

All investing involves risk including loss of principal. No strategy assures success or protects against a loss.

Securities and financial planning offered through LPL Financial, a registered investment advisor.  Member FINRA/SIPC