People are often divided into two categories: “haves” and “have-nots,” or fiscally “organized” versus “disorganized.” Some folks can recite their monthly expenses, savings and pension plans by heart, while others have no idea what they spend weekly on groceries. While these two categories of people may approach their finances from dramatically different angles, both types can benefit from creating a written financial plan.
A financial plan coordinates your short-term needs with long-term goals, current expenses with future ones, and balances withdrawals against anticipated income streams. Furthermore, if something unexpected occurs, your financial plan is a powerful tool to help restore balance to your economic life.
Are your finances in order?
If you ask the average person this question, his first thought will be whether his checkbook is balanced and his bills are paid. If they are, he’ll probably answer in the affirmative. But financial balance entails more than just being up to date with your expenses. It requires knowing the details of your various savings and retirement plans, tax, insurance, and estate plans, and investment management programs – and a firm understanding of how these different aspects interconnect. A financial plan puts all of your present and future needs and goals together.
Do you have a contingency plan?
A successful financial plan includes a contingency component in case of unexpected disasters. In these situations, some goals may be pushed off, but not others. So plan ahead.
Insurance as part of a financial plan
Don’t forget about life insurance. Your financial plan should help you understand how much you will need to protect your family if you die prematurely. And don’t forget about long-term health and nursing insurance.
The whole picture
Creating a financial plan is more of an ‘investment’ than an ‘expense’ because it will put your money to work to help you meet your fiscal goals.
Start planning today by downloading free planning worksheets.
Douglas Goldstein, CFP®, is an investment advisor and author of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing.
Douglas Goldstein, CFP®️ is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published August 15, 2014.