3 Financial Planning Steps


Organization, efficiency and discipline are the three primary steps of financial planning. Organization is knowing where your money comes and goes. An efficient portfolio means a better chance of profits, and discipline keeps you on the right track.

Statistics tell us that the average credit card debt per person - including all people who pay off their cards each month - is over $5,500. Folks don’t have a handle on the big picture of their personal financial world. If you are one of these folks, you should understand three important steps of financial planning and get started today, either on your own, using resources on the Internet, or by hiring a financial planner.

1. Organization

The first and most important step of financial planning is organization. You can be a lot closer to your financial goals in life by organizing your finances and understanding money flows, both inflows (like your paycheck) and outflows (bills).

If your financial life isn’t terribly complicated, an Excel spreadsheet may suit your needs perfectly. However, using something a little more sophisticated, such as Mint, Quicken or other online budgeting tools may become necessary, as you and your financial life continue to evolve.


Your New Job and 401(k)

Pay attention to the details

Land a great new job? Awesome. Now is the perfect time to think about your 401(k) and retirement plan, whether you had one before or not. Saving for retirement is important at all ages, so don’t let this opportunity fall to the bottom of your list.

Here are tips to consider when starting a new job and a new 401(k).

  1. Make more contributions if you have a bigger paycheck. When you get a raise, it is a good idea to increase the amount you contribute to your 401(k). You didn’t have this money in your pocket, so you won’t miss it when you put it straight into your 401(k).
  2. The contribution limit for 2017 is $18,000. If you already meet the limit, let’s talk about whether you should consider contributing to an individual retirement account (IRA) for even more retirement savings.
  3. Don’t pass up the new employer’s match. Sometimes, employers provide a 401(k) match as part of their employee benefits package. They may match your contribution dollar for dollar or a percentage of it up to a set amount.
  4. Your company match is free money. Don’t let it slip through your fingers. If I offered you a bundle of cash – say, a few thousand dollars, perhaps – would you turn it down? Find out the limit and at the bare minimum, contribute that amount.
  5. Name your beneficiaries for your new 401(k) plan. Keep your beneficiaries consistent across all retirement accounts and according to your estate plan. So be sure to update your new plan to reflect changes in your beneficiaries.
  6. Are you now a parent or do you have a new spouse? Updates allow your 401(k) account to pass directly to the person of your choice should you pass away.
  7. Above all, don’t forget to enroll in your new plan. While this may seem obvious, it’s easy to forget signing up for your new company’s 401(k) plan, because many employers require a short waiting period before new employees are eligible to join. If you have to wait, put a reminder in place – circle the enrollment date on your calendar and set an alarm on your smartphone. Just don’t forget.

Your “Old” 401(k)

Wondering what you should do with your old 401(k) accounts? You may prefer to roll your old 401(k) over to an IRA, as it gives you the ability to invest your account in a variety of mutual funds, stocks or bonds beyond what your employer may offer. This helps you to build a well-diversified investment allocation. Choosing low-cost mutual funds or ETFs in an IRA can save you money in the long-term over generally more expensive 401(k) investment fees.


Questions to Ask a Prospective Financial Advisor

What to look for and what’s not important

If you are shopping for a financial advisor, you need a good checklist of questions to ask. What you are looking for is someone who handles clients like you – and who is financially wise. 

As you assess an advisor who manages your assets, for instance, do yourself a favor: Don’t rely on his or her investment record. Clients have differing needs. A money manager whose investment performance touched the stars last year may falter this year. 

More important nowadays is how skillful an advisor is at preserving your assets. That may range beyond market forecasts into such realms as insurance. Losing the ability to work and generate income, because of a sudden disability, can be more ruinous to your financial well-being than a slide in the stock market. This list of questions to a prospective advisor will help you decide whether the person is the right fit for you: 


How to Pay the Bills Now and Pay for Retirement Later

No matter where you are in your working life, retirement savings probably comes in low on your list of financial priorities. After all, you’re busy building your life and career. You have to cover the basics like mortgage, cars, utilities, insurance, and healthcare; then meet the demands that life brings like kids, college, unexpected accidents, and rising costs of just about everything. How are you supposed to focus on long-term goals when short-term responsibilities get in the way?

Most people can relate to that challenge. Did you know that 85% of working age people in a worldwide retirement survey1 said that retirement is not their main savings priority? So what can you do now to save consistently for the future? These tips may seem obvious, but they’re tried and true ways to develop a serious savings habit:

Make saving automatic.

With so many things to manage in life, apps and devices have become an essential tool to ease our everyday burdens. It only makes sense to use digital automation when it comes to retirement savings. Sign up for payroll deduction to effortlessly contribute to your employer’s 401(k) or other plan. If you have a Traditional or Roth IRA, set up an automatic sweep or periodic deposit that ensures you make the annual contribution limit.  Don’t have a retirement account? Arrange for automatic transfers into your savings account through online banking. 


Let Insight Guide Your Retirement Decisions...Not Hindsight

Everyone knows you can’t expect to live comfortably in retirement without thoughtful planning, right?  Not quite. A recent global retirement survey by HSBC found that nearly two-thirds of retirees didn’t know they were financially unprepared until after they retired.*  That’s a lot of people worldwide who didn’t realize the consequences of poor planning until hindsight provided an unsettling view.  

We all tend to put up our own roadblocks when it comes to preparing for retirement. But, meaningful insight from an experienced financial advisor can help change the way you think about long-term planning. Consider your reasons for putting off saving for retirement, and see how professional guidance can change your perspective:

You think you’re too young to start planning.

Retirement seems light years away when your adult life and career are just taking off. But, the earlier you get started, the easier it is to save over time. Putting away even small amounts consistently, taking advantage of employer retirement plans, and sticking to a budget greatly increase your chances of saving enough. Get to know an advisor who can help you make sense of your finances early on.