Creating a Financial Plan

Everyone has heard the Boy Scout’s motto, “Be Prepared!”  Truly, we have a plan for almost everything.  We have plans we follow for blizzards, hurricanes, floods, fires, evacuation routes etc.

We protect ourselves from all of these disasters, but we ignore the financial disasters that can hit us.

Too many of us have no financial plan to follow and are only one crisis away from bankruptcy! According to uscourts.gov, over the past 5 years, almost 2.5 million families have filed for bankruptcy. That’s over a million families per year!

Creating a financial plan is no different from making a plan for any other crisis.

The first step is figuring out where you are at right now.

I know many people hate the word budget but you need to know exactly where all of your money is going each month.

How much are your necessities each month? If worse came to worse, how much do you need to make ends meet?

The next step is to think about what can happen that can cripple your financial state.

There are many things... if you get sick/hurt and lose your job, if you get laid off, if you or your spouse passes away, or if you or one of your kids get extremely sick.

All of these things can cripple your financial situation.

So how do we protect ourselves from them?  
 
One way to protect yourself is to establish an emergency fund.

Most people have a savings account but not an emergency fund. What I mean by that is, they have an account they put money into regularly but then they spend it once they get an amount on what they have been saving for (i.e a vacation, new furniture, new car etc.).

You need to create a designated emergency fund that you only touch in the event of an emergency. Everyone’s situation is different, but a good rule of thumb is 3-6 months of income.

Another way to protect yourself is with insurance.

There are many types of insurance that can protect you from losses, health, homeowners, auto, disability, and life insurance.

Now it’s important to know what you are covered for and what you aren’t.

Some of these may make sense to you, or they may not. You also don’t want to bankrupt yourself trying to afford coverage for all of these.

That’s why an emergency fund is so important.
It allows you to “self-insure”.

Lastly, you need a plan for the future.

Short and Long Term.

Short-term goals like: Do you want to take a big vacation? Or buy a new car?

Long term goals such as: What money are you going to need in the future?, Are you saving for retirement?, Do you want to help your children pay for college? Or is there something else you want to do?, How much money do you need for future expenses? When do you need that money by? Are you on track to reach it?

Where are you at with your financial plan?

If you would like help creating or modifying your plan, give my office a call today!