Financial planning is an ongoing process that provides direction for a person’s financial future. A financial plan can help people set and reach their short-term and long-term goals by creating a financial plan based on income, debt, assets and investments. This step-by-step financial planning checklist approach can provide focus, making it an important component for every person’s financial life.
Why You Should Have A Financial Planning Checklist
Having a financial checklist helps to ensure all bases are covered to achieve increased financial health. Tracking spending and debt payoff can help a person measure their performance over time. Certain financial goals, such as building an emergency fund or saving for a child’s education, can help people plan for future expenses and provide peace of mind. Here are just a few essentials that a financial planning checklist should include.
Create A Budget For Yourself
Budgeting is a vital skill that everyone should learn. A budget acts as a spending plan that helps ensure that there is enough money to pay bills and other expenses. Following a budget can also help a person stay out of debt, or if they are currently in debt, slowly get out of debt.
Build In An Emergency Fund
Debt can accrue when a person does not have an emergency fund in place. An emergency fund is a source of available cash that can be used to pay for unplanned expenses, such as the loss of a job or an extended illness. It provides a cushion for unexpected and unplanned expenses.
Manage Your Debt
Debt, especially debt with high-interest rates, can quickly build up. Financial planning can help a person gain control of their debt by making payments that help to pay off the debt over time.
Credit Card Debt
Credit card debt can be challenging to pay off without a solid financial plan. Paying more than the minimum payment and only using the card for essential purchases can help diminish the amount owed. A financial plan can help determine how much to dedicate to paying off credit card debt.
Student Loan Debt
According to the Federal Reserve, student loan debt totals more than $1.3 trillion in the United States. The burden of student loan debt can be tough to manage, making budgeting a must. A financial plan should outline the total debt, the terms of the debt and whether options like consolidation are a suitable choice.
Car Loans Debt
Car loan debt often occupies a large percentage of the average person’s budget. Paying off this debt early can help free up some money and minimize the amount of interest paid over time.
Mortgage Debt
A home loan is one of the largest purchases that a person will ever make in their lifetime. The amount of interest paid on a mortgage can be substantial over the life of a 10, 15, 20 or even 30-year mortgage. Paying down a mortgage early or refinancing an existing loan can save money.
Outline Your Financial Goals
Financial planning requires a person to outline their financial goals. This will generally include both short-term and long-term goals. When setting goals, it is important to be realistic and consider if the goal is feasible within the given timeframe.
Short-Term Financial Goals
Short-term financial goals refer to goals that a person wants to meet in the upcoming future, usually within the next one to five years. Examples of short-term goals include purchasing a car, saving for a down payment for a home, traveling on vacation or buying special equipment or furniture.
Long-Term Financial Goals
In addition to setting short-term goals, it is important to set goals for further in the future. A person should look forward 20 to 30 years and consider where they would like to be and how they envision their financial state at that time. For some, this may mean starting a business or downsizing their home. For others, it may be buying a vacation home or retiring.
Plan for Retirement Now
The average American has no money saved for retirement. Financial planning should include specifics on how money will be saved for retirement and how much will be put into savings or another investment vehicle.
Maximize Your Benefits
Financial planning also means taking advantage of financial opportunities. Employees that have access to 401(k) matching contributions or attractive stock options should consider using these benefits to save for retirement.
Watch Over Your Accounts
Errors can be made that put a person’s financial status at risk. It is important to regularly review individual retirement accounts and employer-sponsored accounts to ensure that the balance is growing correctly.
Speak To A Financial Professional For More Info On A Financial Planning Checklist
Creating a financial plan can help a person see the bigger picture and meet their goals faster than they thought possible. For more information about the financial planning process or to speak with a financial professional , contact the financial advisors at Campbell Wealth Management, Inc.
