Financial Planning Checklist for Beginners

October is Financial Planning Month, making now a great time to think about your financial preparedness and well-being. Money isn’t everything in life, but it certainly helps to achieve security and to open opportunities for you and your family. 

Personal finance can be complex, especially as your wealth grows. Each of your decisions must support the next, and align with your life goals. The following financial planning checklist will help you identify which financial topics you’ve got covered, and areas where you need help to achieve your wealth and life objectives.

Saving for Emergencies and Retirement

Saving is the most fundamental element of achieving financial freedom. Everyone’s savings goals are different, but the more you earn and spend, the more you need to save. Key questions include:

  • Do you have emergency savings to cover at least six months of cash needs?
  • Are you maximizing your employer retirement plan contributions?
  • Is maximizing your retirement plan enough to put you on track for retirement? For many high income earners, it’s not. (For more from this author, see: Is Maxing Your 401(k) Contribution Enough?)
  • Do your retirement planning projections inspire confidence in your long-term financial security?

Picking the Right Investments to Achieve Goals

For most individuals, the right mix of stocks, bonds and other investments is essential to weathering market fluctuations and, ultimately, achieving the investment growth necessary to reach your long-term goals. Top investment questions to consider include:

  • Are you properly positioned to enjoy both growth if the markets prosper and security if they contract?
  • Do you have adequate cash and bonds to get you through a downturn? 
    • Does your investment mix allow you to sleep at night? 
    • Can your cash and bonds sustain income needs for at least five years to avoid selling at depressed prices?
    • Do you have some extra in cash and bonds to buy stocks when they’re cheap?
  • Are you adequately diversified, or could certain stocks or sector positions materially alter your financial standing?
  • Are you disciplined in your investment approach (i.e., taking profits as the markets flourish and buying during a market correction)?

Educating Your Kids About Finances and Saving for College

If you have children, financial literacy is a priority. For some families, so too is saving for college. Ask yourself:

  • Are you teaching your kids about money, preparing them to become financially confident adults? (For related reading from this author, see: 6 Ways to Help Your Kids Be Smart About Money.)
  • Are you balancing saving for college and saving for your own future?
  • Are you taking advantage of college savings tax benefits that might be available in your state?
  • Do you have a realistic sense of college costs relative to your savings and the expectations you’ve built for your child?

Protecting Your Assets and Income With Insurance

Asset and income protection provide peace of mind for you and your family. There are many forms of insurance and asset titling structures. Key areas to evaluate include:

  • Life insurance: Are adequate resources available to support your family’s lifestyle in the event of your death? (For related reading, see: Which Life Insurance Policy is Best for You?)
  • Disability insurance: Would you and your family be able to cope financially if you’re no longer able to work?
  • Liability insurance: Are your assets protected from personal or professional liability? 
  • Long-term care insurance: If you’re 45 or older, do you have insurance in place to protect your retirement from long-term care costs?

Updating Estate Planning Documents

Everyone over the age of 18 needs basic estate planning documents. Key considerations include:

  • Do you have the necessary documents in place, including a power of attorney, medical directive and will?
  • Do your regularly review your documents and beneficiary designations (which supersede other documents), to ensure they accurately reflect your wishes?
  • If you have young children, do your documents include guardianship provisions?
  • If assets are going to be held in trust post-death, are your documents and beneficiary designations structured to hold retirement assets without subjecting them to adverse tax implications?

Keeping Your Business Running Without You

If you own a business, it’s both a source of income and a potential asset. You owe it to yourself, your family and your employees to formulate a contingency plan for the future. At a minimum, consider:

  • Can someone step in and run your business if you’re not there?
  • Are your named agents qualified to manage your business?
  • Does your succession plan capture the value of your business? (For related reading, see: How to Create a Business Succession Plan.)

Finding the Right Financial Advisor

Very few people have the time or expertise to adequately research financial topics and make the right decisions. Whether you have an advisor, or are considering hiring one, always ask questions, including:

  • Does your advisor have the appropriate training, credentials and experience? We recommend working with a certified financial planner (CFP) for wealth management services and a certified public accountant (CPA) for tax planning and preparation.
  • Do your advisors collaborate to ensure that you’re receiving cohesive advice?
  • Do your advisors proactively work with you, helping you to plan for life’s many stages and transitions? 

Financial planning can help prioritize your objectives, guide your decision-making and help you secure the future for you and those you care about. The goal of financial planning is to help you to translate your real-life objectives into real-life solutions and achievements.

(For more from this author, see: 8 Ways to Prepare Your Finances for Inflation.)

 

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