Financial Planning Checklist

Wondering why you need to create a financial planning checklist? This is because it makes you financially stronger. When you have a checklist, you can easily save money, achieve your goals, get rid of debt, plan for your retirement, and fulfill your family’s desires.

A financial checklist is a complete package that holds you from making wrong decisions and gives your promising outcomes. But how can you make one for yourself? Read the article further to understand the aspects present in a financial checklist and how you can deal with them.

Set Financial Goals

The first thing you need to do in your financial planning checklist is to define your financial goals. You need to set goals for the remaining year or the next 12 months. Make sure to divide your objectives into short term, midterm, and long term goals.

Short Term Goals

Your short term goals should include the following things:

• Creating a budget for each month or a year
• Increase your savings in an emergency fund or establishing one if you don’t have it already
• Make sure to pay off all your credit cards

Mid Term Goals

Your midterm goals should include the following objectives.

• Prepare to get disability life insurance and other life insurance
• Plan for your dreams, such as buying your own home or vacation home, moving, renovation, or saving so that you have funds to fulfill your family’s desires

Long Term Goals

Here are the objectives you need to achieve as long-term goals.

• Determining how much savings you will need to comfortably spend your life after retirement
• Figuring out the best methods to increase your retirement savings

Create a Budget for Yourself

If you have a habit of spending money without planning, then stop doing this from today. You need to know the flow of your money. To lead a healthy financial life, you need to create a budget to manage your expenses and income. For this reason, divide your income into essential expenditures, investments, and entertainment purposes. Make sure to use the specific amount of money you have planned to use, not more than that.

Moreover, the key to savings is to pay your debts first. Keep the money with you that you are planning to use in a month. Not to mention, set automatic deposit to a money market or savings account, which will help you stay disciplined. The habit of saving a specific amount of money after every paycheck will help you effectively save your wealth to achieve your mid and long-term financial goals successfully.

Review Your Investments

It is important to invest in something to multiply your funds for future needs or achieve your goals. Additionally, you need to review your investments and at what point they are standing during the annual financial planning process. This becomes even more crucial when you witness a great shift in your economy. So, make sure to review your asset allocation every few months and change the strategies to get the most out of them.

For instance, if you have invested in the stocks, and their value is dropping, you can add real estate investments in your portfolio to balance some of the volatility. You also need to determine which investment plan will give your promising results and help you achieve your goals. Also, think about whether your current investments are right and enough to achieve your goals. The last thing you should understand is that it is better to contribute your money to different investment options. This way, you can limit your risk of getting empty-handed if you face any loss.

Manage Your Debts

Managing your debts is one of the most important things on the financial planning checklist. It’s crucial to learn how you can get rid of your short and long-term debts, including student loans and credit card debts. Examples of short-term debts are a relatively low credit card balance that you can pay off in 12 months and a three-year car loan. This way, long-term debts include student loans and home mortgages, which need much longer time to pay off, such as 25 years.

Credit Card Debt

Americans hold an average of four credit cards with an average debt balance of $6,028, according to Experian. Many people face problems by charging extra on their credit cards. This usually happens when they have to pay for unexpected expenses such as unforeseen medical problems or major car repairs. It’s better to pay your high-interest rates debt first, such as credit cards. Additionally, try to pay a minimum of your debt, such as the automobile or student loans. People who are paying an 18% interest rate on a couple of credit cards can opt for the debt consolidation loan. This way, you can lower the interest rate, reduce the amount of money you are paying, and need to pay one monthly payment.

Student Loan Debt

According to the Federal Reserve report, more than half of the people in the US who attended college took some debt to pay for fees. Among these students who have outstanding education debt, 94% had taken student loans, and 20% of those who have education debt were far on their payments. If you are also suffering from it, you need to pay your monthly minimum payments to get rid of this debt.

Car Loan Debt

It’s important for people who need a car to understand how they can buy one when calculating their financial options. According to the Federal Reserve Bank of New York research, around 33% of Americans dealt with a car loan debt during the last quarter of 2018 and an average balance of $14,200. Moreover, if you already have a significant amount of debts that you need to pay off, it’s better to choose other options like leasing a car or buying a used car instead of investing in a new car.

Mortgage Debt

According to Experian, in the first quarter of 2019, every American debt holder’s average mortgage debt was $202,284. It’s quite a good amount when you try to pay it off. If you already have this debt, it’s better to opt for refinancing, which can save you from paying a significant amount of interest.

Planning for Tax Investments

When you are managing your finances, you also need to focus on your tax planning. If you are paying more taxes than an average person, your finances can be greatly affected. Try to take all your applicable deductions into account. You can deduct local and state taxes, medical expenses, mortgage interest, and charitable contributions. If you are getting capital gains on your investments, make sure to consider your investments preferential tax treatment.

You also need to think about how selling off your assets can affect your tax liability. This is why if you sell your investments for profit, you need to pay short or long-term capital gains tax. But it also depends on how much time you are holding the assets. You can wait to make any sound decisions until the end of the year. You need to consider the following strategies when you reach that point of the year.

• You can harvest tax losses by changing losing investments and using different ones to balance your higher tax bill.
• You need to look into whether you can balance capital losses and gains.

Check Retirement Savings Plans

Another aspect you need to look at in your financial planning checklist is reviewing a retirement savings plan. The best way to enjoy tax advantages is saving for your retirement through 401 (K) or individual retirement accounts (IRA). When you are considering investing in the annual financial plan, you need to consider the following things.

• Decide whether a traditional or Roth IRA is ideal for you
• Think to switch your existing traditional or Roth IRA to a different brokerage
• Consider converting a traditional IRA to Roth one. When your account’s value or income is lower, it is a great way to make changes at the lowest possible cost.
• Do the procedure mentioned above with your 401 (K), which can be regular or Roth
• Change your older 401 (K) accounts from a previous job. If you have changed the job or your employment status has changed from employment to self-employment, learn about the limits for SEP-IRA or other types of self-employment retirement accounts. Also, maximize your contribution amounts.
• Decrease or increase your annual contributions to your retirement accounts

Estate Plan

An estate plan is a wise strategy that saves you and your family from future troubles. A comprehensive estate plan includes several things, such as the power of attorney, will, trusts, and medical and financial information. It is better to plan for an estate plan as early as possible, as you don’t know when you will die. The following are some steps that you need to follow to create an estate plan.

Choose an Estate Plan Attorney

Estate plans include planning taxable and non-taxable obligations and important decisions of your family. As estate planning is a complex, detailed, and time-consuming task, you need to hire an experienced and well-qualified attorney to help you construct an estate plan. An expert will analyze your family situations, help you make the right steps, and navigate you through the complex procedures of creating an estate plan. Ensure that your attorney has knowledge about your state laws, as you also need to go through legal formalities.

List of Your Assets and Debts

After hiring an eligible lawyer, you need to calculate your worth. In this case, you need to create a comprehensive list of your total debts and assets. Now you will calculate your net worth by adding amounts in bank accounts, investments, personal property (such as art, jewelry, and furniture), retirement plan (IRA and 401 (K), owned cars, cash value if you have any insurance policy, and others. You need to subtract your debts from this amount, including personal loan, mortgage loan, other borrowings, student loan, credit card balance, etc. These calculations will help your lawyer to check potential taxes on your money.

Consider a Living Trust or Will

You need to decide whether you want a will or a living trust. Both of these methods have their advantages and disadvantages. You need to discuss them properly with your financial advisor or lawyer to make the right decisions.

Consider a Financial Power of Attorney

This is a document that gives authorization to someone you trust who is eligible to handle your finances, property, and business in case of disability. This person is known as an agent or attorney-in-fact. This document gives your trusted person the power to transact real estate matters and make financial decisions immediately. Moreover, this also limits the risk of disputes in families.

Choose Beneficiaries

You need to keep in mind that some of your property will go directly to your family when you die. For example, if you have a joint-property, your spouse will automatically get the house when you pass away. But suppose you have payable on brokerage or payable on death saving account. In that case, the securities and cash from these accounts will be directly given to your beneficiaries or specific family members. Similarly, your beneficiaries will get your 401 (K), IRAs, and other life coverage. This is why it’s important to select the beneficiary’s name. Additionally, give these documents to your attorney so that they can manage your belongings when you die.

Work With An Advisor

Some people find it difficult to create and follow a financial planning checklist, as it becomes harder to figure out everything on your own. This is why it’s better to consult an advisor to make the right decisions. Not only do they help you maintain your financial checklist, but they also help you review them after some time and guide you when you can do it in the future. This way, you can easily reach your goals and save some funds for your future.

Even if you are good at financing and have not made any mistakes up till now, hiring an advisor is still a great idea. Experts also give you more choices to invest in better areas. So, make your checklist as soon as possible to avoid any future problems.

Engage with the entire King Financial Network team on www.kingfn.com to see what other expert advice we can provide towards your financial well-being.

A.J. Vignola is a Financial Advisor at King Financial Network. He collaborates with the unique and extensive KFN network to analyze and strengthen strategies for each client’s financial goals.

King Financial Network is an integrated, team-based network that takes a comprehensive, customized, and independent approach to guide you through Financial, Retirement, Tax, Insurance, and Estate Planning.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Sources

• https://vimeo.com/495294124
• https://www.investopedia.com/articles/personal-finance/your-annual-financial-planning-check-list.asp
• https://www.westernsouthern.com/learn/financial-education/financial-planning-checklist
• https://www.annuityfyi.com/guides/financial-planning-checklist/
• https://www.wiseradvisor.com/article/7-key-steps-to-create-a-good-estate-plan-4254/