We’ve been in this financial planning series for several weeks now, so let’s take a moment and recap our journey in creating a sound financial plan.
- Start with an Emergency Fund: Begin with an emergency fund equal to 3-6 months’ worth of expenses.
- Insure Your Most Valuable Asset: Ensure your ability to make money by insuring against disability and loss of life. Care for your loved ones with cost-effective term insurance.
- Start Saving for Retirement: Take advantage of your company match and start early to enjoy the benefits of compound growth.
- Get Rid of Bad Debt: Stop habits that allow debt to grow and create a plan to pay it down, starting with the highest interest rate cards/loans or the smallest ones.
- Set Up a Budget: Plan for other goals by having a good budget in place. This is a good article to start with.
- Methods to Creating a Financial Plan: This article lays the groundwork for the complex planning discussed going forward.
- Detailed Look at Retirement Planning: Discussing rules of thumb to determine if you are on track.
Now, let’s be honest here. If you’ve completed all the steps mentioned above and still have room in your budget to fund additional goals, you’re doing exceptionally well. With over 20 years of experience as a financial planner, I want to assure you that feeling overwhelmed at this point is not uncommon.
Courtney Montgomery delved into New Year’s resolutions and health in a recent article, Empowering Wellness, for the journal. She emphasized the importance of celebrating small wins and not giving up. The same principle applies to financial planning. If your focus right now is on building your emergency fund, that’s a significant accomplishment—celebrate that win. If you’re in the process of creating a budget as a crucial step toward achieving your goals, that’s commendable too. Celebrate each step in the right direction and gradually build on your progress one step at a time.
Assuming you have the basics in place, what about other goals like a house, marriage, college, vacations, or season LSU Tickets with a motor home to go with it (that is one of mine)? The approach remains the same—start with the end in mind, calculate the cost, and start saving. However, for short-term goals, your investment strategy will differ. If you’ll need the money within a year, consider short-term options like money market, US Treasury securities, or CDs. For longer-term goals, adjust your investment strategy accordingly.
For example, consider college savings with 529 plans. These plans offer tax benefits, and in Louisiana, there’s an added state income tax deduction with the START Saving plan. Prioritize your goals, look at your budget, and start saving for the highest priority item, then move down the list.
Celebrate small wins and keep working towards your goals!
Next week, we’ll delve into estate planning, covering basics initially and getting more complex later. In future articles, we’ll explore the investment side of wealth management, providing education on diversification, asset allocation, expenses, stocks, bonds, mutual funds, ETFs, and more. We’ll take it one week at a time.
(Matt Bankston, CFP®, Co-Publisher of the Shreveport Bossier Journal, also serves as a Managing Director at Choreo Advisors, an independent firm focused on redefining the RIA’s role in the wealth advisory industry. Choreo, LLC is registered as an investment adviser with the U.S. Securities and Exchange Commission (SEC). Registration as an investment adviser does not imply a certain level of skill or training of the adviser or its representatives.)