Set it and Forget it? Not With Your Financial Plan

Do you have a financial plan? If so, have you reviewed it recently? Does your financial plan ensure that you and your family are financially sound? Being financially stable does not only mean a successful retirement or a diversified investment strategy. Your financial plan should also consider all facets of your life to aid in making prudent financial decisions over the years.

If you don't already have a financial plan, now is the time to build that roadmap for success.

Where to Start

First, start assessing your current situation and compare it to your long-term goals for self, family, and community. Then, jot down your current income and estimated expenses. Next, take the time to create a timeline for such milestones as purchasing a home, starting a family, putting children through college, and retiring. In addition, make notes regarding your charitable intentions.

From this, take a look at your net take-home pay and compare it to discretionary and non-discretionary expenses to see how much you have left over to start saving for your goals. A financial advisor will be instrumental in helping you allocate an appropriate amount of savings for each goal. And if you have debt that you'd like to knock out, he or she could advise on how best to pay it down/off.

What Else to Include in Your Plan

Basic planning topics consist of cash flow and savings strategy, allocation of savings (bank account, brokerage account, retirement account, health savings account, 529 plan), investment strategy, retirement planning, income tax, insurance (life, disability, long-term care, health, liability protection), and estate planning.

Not all of this information may be included in your initial plan, but it should come into the picture when you see a need or when opportunities present themselves. Remember…a financial plan needs to be reviewed every year and enhanced or revised as necessary.

Additional Issues That Need Attention

Employee Benefits

It is very important to understand what benefits your employer offers and that you take advantage of those benefits appropriately:

• How much does your employer contribute to the retirement plan on your behalf? If your cash flow prohibits you from personally contributing the maximum amount determined by the IRS, you should at least save the minimum amount needed to take full advantage of an employer match.
  
  
• Understand the investment options available in the employer retirement plan and determine how your contributions should be invested.
  
  
• What health insurance policy is best for you when given several options at each renewal? Should you contribute to a health savings account?
  
  
• Does your employer offer disability insurance? If so, what are the benefits, and should you enroll in coverage? Is it enough? If not, should you buy a personal policy to supplement your employer's?
  
  
• Suppose your employer offers equity awards or the option to purchase their stock through salary deferral. Do you understand how these strategies work as well as the tax implications and potential risks associated with this type of compensation?
  

Beneficiary Designations

Do the provisions in your last will and testament or revocable trust coincide with the beneficiaries you have named on your life insurance policies and retirement accounts?

Charitable Gifting

Gifts to charity can be made with cash, securities, or other property. Understanding the tax benefits when making gifts is important as the deductibility is not the same.

Your Need for Life Insurance

It’s crucial that you have enough life insurance to provide cash for a specific need or strategy to benefit others. Coverage should be reviewed periodically to ensure it remains appropriate.

• If a spouse decides not to work, does the working spouse have enough life insurance to provide for the non-working spouse (and children) if he/she passes prematurely?
  
  
• Or, have you accumulated enough wealth to provide for the family so that coverage is no longer necessary?
  
  
• If you’re co-owner of a business, life insurance can assist in buying-out the deceased partner’s share in the event of a premature death.

How to Pay for Big Purchases

Over the years, you will face decisions about financing large purchases such as a new home, vehicle, or business.

• When does it make sense to borrow versus using cash on hand?
  
  
• Is one strategy always the best, or are there factors that would suggest taking a different approach?
  
  

Summary

Understanding your total financial picture and ensuring that all facets of your financial plan work together is imperative. As life changes, so does your strategy for long-term financial security. It's essential that you engage a qualified wealth advisor to help develop your financial plan, and one that remains engaged in adjusting your financial strategy over time.

Do not put your financial plan on the shelf and carry-on as usual. As we've all seen these past six months, life isn't that easy. When life, the economy, or your family situation shifts, so must your financial plan.

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