Spring 2019 Perspectives & Planning Financial Empowerment: Every Journey Begins with a Single Step

Money should not be a cause for stress; but our innate fear of the unknown often leads to financial anxiety. This is exacerbated by radio hosts, authors, television personalities, and corporations looking to profit from that fear. Countless articles on retirement planning begin with similar sounding statements: “Have you saved enough for retirement? Most people haven’t”. The question is valid, but the tone is designed to trigger anxiety. Their goal? To get you to purchase their book, subscription, service, etc.

At its core, a financial plan looks at all your current, future, and desired expenses and compares them to your savings and income sources. This article will focus on the three initial steps to developing a financial plan.

Step 1: Estimate your expenses and write them down. This is everything from mortgage payments and grocery bills to a dream vacation and funding education plans for the grandchildren. If you think you may spend money on it, add it to the list. Make a note of whether it is a regular monthly expense, a once in a life-time expense, or somewhere in between. Do not let the numbers scare you; it’s important information and just one step in the financial planning process. Some people find it easier to use a pre-established expense template. Free templates can be found online or we would be happy to provide one.

Step 2: Record all your current and future income. Write down the value of income sources such as your salary, pensions, social security, rental income, inheritance, etc. Make a note of when those income flows begin and end.

Step 3: Document all your assets and liabilities. Keep a list of every dollar, investment, and asset that you own. A checking account? Add it to the list. Your home’s property value? Add it to the list. That little old 401k that you’ve been meaning to roll into your IRA but haven’t gotten around to yet? Add it to the list. Also make note of any outstanding loans you may have. Whether it’s a mortgage, credit cards, or student loan debt, they are all important to track and manage.

These are the first three steps towards building a financial plan. Next time, we will discuss what to do with your collected data. The end result will determine whether the listed expenses and aspirational goals can all be comfortably afforded. Financial planning is not rocket science, but it does require some work. Don’t let the numbers scare you, find pride in turning the opaque into the transparent.