Financial Planning
Identify Your Goals
First things first, make a list of your goals. Where do you see yourself in one year, five years, ten years, and further out in the future? Take all things into consideration when identifying goals. Below are a few examples of common goals we hear:
- Debt/Mortgage Payoff
- Vacation or Vacation Home
- Education Expense for You or a Family Member
- Growing Family (Childcare, Insurance, Education, Healthcare)
- Business Start-up
- Charitable Contributions
Now, write your goals down with specifics. An example would be rather than stating ‘vacation home’, determine where and how large that home is going be, such as ‘vacation home in Costa Rica that has five bedrooms and a built in a pool’. Being specific will help quantify exactly how much money you should be planning to spend.
After writing down specific goals, determine the amount of money you think you will need, and the target date you would like to accomplish that goal.
| Goals | Amount Needed | Target Date |
| $ | ||
| $ | ||
| $ | ||
| $ | ||
| $ | ||
| $ | ||
| $ | ||
| $ |
What is My Net Worth?
It’s time to inventory your current financial resources. Take all assets into consideration such as bank accounts, vehicles, homes, retirement accounts, stocks, jewelry, etc. Once you have a list of financial resources, you will want to make a list of all outstanding debts such as loans, mortgages, credit cards, taxes, etc.
Estimate the value of everything you own, minus the value of your debts. When taking into consideration your home and property value, use today’s estimated market value. This will give you a good idea of how well you have finances in line now, and how much work it will take to accomplish your desired goals.
Use the worksheet below to determine your net worth.
| ASSETS (Current Value) | TOTAL | SELF | SPOUSE |
| Checking accounts | $ | $ | $ |
| Savings accounts | $ | $ | $ |
| Brokerage accounts | $ | $ | $ |
| Money market accounts | $ | $ | $ |
| Certificates of deposit | $ | $ | $ |
| IRA accounts | $ | $ | $ |
| Keogh accounts | $ | $ | $ |
| 401(k) plans | $ | $ | $ |
| Pension plans | $ | $ | $ |
| Other retirement accounts | $ | $ | $ |
| Life insurance (cash values) | $ | $ | $ |
| Annuities | $ | $ | $ |
| Bonds (government) | $ | $ | $ |
| Bonds (corporate) | $ | $ | $ |
| Mutual funds | $ | $ | $ |
| Stocks | $ | $ | $ |
| Other securities | $ | $ | $ |
| Money owed to you | $ | $ | $ |
| Home | $ | $ | $ |
| Other real estate | $ | $ | $ |
| Automobiles | $ | $ | $ |
| Household furnishings | $ | $ | $ |
| Jewelry | $ | $ | $ |
| Other assets | $ | $ | $ |
| Total Assets | $ | $ | $ |
| LIABILITIES (Current Value) | TOTAL | SELF | SPOUSE |
| Home mortgage | |||
| Other mortgages | |||
| Automobile loans | |||
| Credit card balances | |||
| Installment accounts | |||
| Contractual obligations | |||
| Money owed to others | |||
| Income taxes | |||
| Pledges | |||
| Other debts | |||
| Total Liabilities | |||
| Total Assets (from above) | $ | $ | $ |
| Less Liabilities (from above) | $ | $ | $ |
| Net Worth (Assets less Liabilities) | $ | $ | $ |
Determine Your Cash Flow
Determining your cash flow involves finding out how much income you receive per year, minus your expenses. Income includes salary and wages, investment income, retirement income, and all other sources of income.
When filling in your expense, look back at your bank statement or credit card history to see what repeat expenses you have monthly, quarterly, bi-annually, or annually. Having past transactional statements will also give you an idea of your monthly average spent on gas, groceries, dining out, utilities, taxes, personal items, etc.
Once you see for yourself how much is coming in and how much of it is going out, you can start to make adjustments in your spending to meet your savings goals.
| Income | Total | Self | Spouse |
| Salary/Wages | $ | $ | $ |
| Interest/Dividends | |||
| Social Security | |||
| Retirement Plans | |||
| Reimbursements (only if included as an expense) | |||
| Sale of investments | |||
| Other income | |||
| Total Income | $ | $ | $ |
| Expenses | Total | Self | Spouse |
| Savings (including pension plan contributions) | |||
| Income taxes | |||
| Property taxes | |||
| Insurance (health, disability, life, car, home) | |||
| Mortgage/rent | |||
| Other debt payments | |||
| Utilities (heat, electric, water, garbage, phone) | |||
| Transportation | |||
| Vacation | |||
| Medical (other than insurance) | |||
| Personal (small cash expenditures, such as haircuts) | |||
| Charitable contributions | |||
| Food | |||
| Restaurants | |||
| Recreation | |||
| Holiday expenses | |||
| Gifts | |||
| Education | |||
| Clothing | |||
| Other (children, professional fees, hobbies, etc. – if large expenditures, create a line item for each) | |||
| Miscellaneous | |||
| Total Expenses |
Planning Your Financial Goals
Prepare for the Unexpected
A statement you have probably heard many times before, “prepare for the unexpected”. Ensure you have a financial safety net that includes three to six months worth of living expenses, just in case you lose your job or run into another health or personal emergency. You do not want your entire financial goals to be wiped out because you had to use the money on an emergency.
Life Insurance
You should have a policy with enough coverage, should a catastrophe occur to ensure your family would continue to enjoy the same level of income it does currently.
Disability Insurance
In the event of lost income due to illness or injury, would your family still be able to live within in current means? If not, you may want to explore a disability insurance policy.
Auto, Home, and Health Insurance
Always review your auto, home and health insurance renewals. Often times there may be a small change that ends up as big expense should an emergency occur. It’s important to make sure these types of policies provide adequate coverage.
Put Your Financial Plan into Action
It is unlikely that you will continue on the path of current expenses with your current cash flow. Perhaps you have determined that you need another source of income, or you have found ways to cut expenses.
Once you have cash flow and emergency funds figured out you need to do one of the most important things – make a plan and stick to it. How much will you save? What accounts will they be placed into? What is your strategy?
You may know you need to save $10,000 per year, and you may have a plan based on your personal risk assessment to have a small amount of your bi-weekly check placed into a brokerage account. Whether it be your or a financial advisor monitoring this account, you will likely need to make quarterly payments into a savings account to ensure money is not lost should the market undergo a significant downfall.
Aside from monitoring your savings and investments, be sure to stick to the plan and evaluate periodically. You may find that you are living within your means and can afford to save more, which would reduce the time needed to save, or perhaps you need to save less in order to pay a new expense.
This guide has been developed to initiate your financial planning. Determine where your finances currently stand, and where you would like them to be in the future. Either way, monitoring and evaluating your savings will keep you on track to reach your goals.