Five Essential Financial Planning Tips

By on April 12, 2013
Best Financial Planning Tips

 Are you making good progress on your financial goals for the year? Whether you want to save more for retirement, put aside more for your kids college education or have other things you want to accomplish, now is a good time to take a step back and take stock of where things stand, and then make any necessary adjustments. The following five financial planning tips can help you keep your finances on track for the rest of the year.

Tip #1: Make a Budget

If you’re spending regularly exceeds what you bring in, you’ll never be able to achieve your long-term financial goals—and you could be setting yourself up for financial disaster. Start tracking your income and expenses so that you know exactly how much is going out and coming in. After a couple of months of diligent record keeping, you may start to see spending trends that you didn’t realize existed (for example, perhaps you’re spending more on dining out than you realized).  Then, you can start being more proactive about monitoring expenses so that you can use your money to achieve your long-term goals, not just short-term wants.

Tip #2: Reduce Your Debt

Excessive debt will hold you back from achieving your financial goals. High-interest credit card debt is especially problematic. If you have credit card debt, make efforts to pay it off as quickly possible. Then, once you’ve eliminated that debt, resolve to use credit wisely. Pay off your balance every month, rather than rolling it over from month to month, so that you can avoid falling into the same debt trap in the future.  Eliminating other debt, including car loans, students loans and your mortgage, will also help you free up cash that you can use to pursue your other financial goals.

Tip #3: Evaluate Your Savings Plan

What percentage of your income are you saving? Take a hard look at your budget and see if there are ways you could be saving more. If it’s hard to find the discipline to save, consider having a certain percentage automatically deducted from your paycheck, so that you don’t have to remember to do it yourself.

Where you save is almost as important as how much you save. Of course, you’ll want to keep some money in easily accessible accounts for emergencies. But if you have longer-term goals, like saving for retirement or a child’s college education, you’re probably better off investing those funds, so your money is working for you. If your employer offers a retirement plan, like a 401(k), make sure that you’re making contributions, especially if there’s an employer matching contribution. Other investment vehicles exist for other goals, like 529 plans for college expenses. Not sure how to get started investing? Talk to a financial professional who can help you evaluate your different options.

Tip #4: Review Your Insurance Coverage

Insurance helps you prepare for the unexpected. You should review your insurance coverage on a regular basis, including your health, life, auto, homeowners or renters, and disability policies. If you’re older, it may be time to look into long-term-care insurance. As your life changes, you’ll find that your insurance needs also change. Regular policy check-ups will help ensure that you are not over- or under-insured.

Tip #5: Update Your Estate Plan

Comprehensive estate planning is a critical component of your overall financial plan. If you don’t have a will, talk to an estate planning attorney about creating one. But a will is just one part of an estate plan. You should also review your beneficiary designations on retirement accounts and life insurance policies, as well as designate someone as your power of attorney, name a healthcare proxy, and create advance healthcare directives. Taking these steps today will help reduce confusion if you die or become disabled, and will also ensure that your wishes are followed as far as the healthcare treatments you receive and the dispersal of your assets.

Bottom Line: Don’t Neglect Financial Planning

Financial planning may not be the most exciting activity, but setting aside some time now to review your situation will put you on track to achieve your most important goals. If you’re not sure how to get started, seek out an experienced, fee-only financial advisor, who can provide objective advice and guidance on managing your financial affairs.

By Chris Cooper, CFP®

About Jacqueline Maddison

Jacqueline Maddison is the Founder and Editor-in-Chief of Rancho Santa Fe Magazine. She believes in shining light on the best of the best in life. She welcomes you into the world of the ultimate luxury lifestyle.


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