Insights

X Where to Start with Your Financial Planning?
Posted on October 23, 2017

Where to Start with Your Financial Planning?

Blog

Published by Kerry Meath-Sinkin

As a young couple or new parent, life is full! All of these new changes make it easy to brush those “non-essential” tasks aside. Trust me, I get it! It is way easier to sit down with my husband and enjoy an episode of Brooklyn 99, than to talk about a will, spending plan, or what kind of insurance to purchase. However, these tasks are also essential.

Why you may ask? Because even though it might not seem essential in the moment, all of these pieces set you up for success long term, especially when an unforeseen event comes your way. The reality is we never know what our future holds. This makes the future exciting, but also a little scary. While we can never plan for what lies ahead, we can put at least a few major pieces in place to plan for what might be coming.

So what are the major pieces to get in place? We are not taught finances or estate planning in school, so it can be hard to know what is important or where to start. There are many pieces to keep in mind, but below are some important ones to help you get started.  If you have the time and energy you can use this list to get started. If you are too busy or feel overwhelmed reading through this list financial planners are a great resource to help you navigate these and many other aspects of your financial life. Please reach out with any questions you may have.

 

1)      Pay bills & minimum debts – This is essential! Paying your monthly bills, including minimum payments avoids penalties and prevents finances from spinning out of control. This also keeps your credit history in good standing, which is important when buying a house, or applying for a new job. Automate this process where possible!

2)      Health Insurance – This ensures that you will be able to get the care you need, and that you won’t get into financial trouble with devastatingly high medical bills.

3)      Wills & Estates – Basic estate planning is important as you start your family, even if you don’t have a lot of money. A will ensures that your children have the plan you would want for them. A health care proxy designates a specific person to handle medication decisions for you, in case you are unable to do it yourself. A durable power of attorney does the same for your finances. This can be done relatively cheaply to ensure who have these important decisions taken care of. If you do have any 401(k) plans through work, make sure they also have the correct beneficiary information.

4)      Life Insurance – I know for me this can often get a bad name because of the horrible stories about fraud that get into the news. And life insurance is not essential for everyone, but is important if you have only one working parent supporting your family’s basic needs. There are several different types of life insurance, but often term life insurance is all that 98% of us will ever need.

5)      Long-Term Disability Insurance – Long-term disability insurance protects your ability to earn future income by sending you a monthly check if a medical condition prevents you from working for an extended period of time. If you already have enough money to live on for the rest of your life this isn’t necessary, otherwise this might be a protection worth the cost.

6)      Liability Insurance – Liability insurance covers you in case you accidentally injure someone or damage their property. This is already part of your auto and home-owners policy, but it is a good idea to check coverage and increase if needed.  Protecting yourself is especially important if you have significant savings or income that you would like to protect. An umbrella policy can provide you the extra coverage and it is normally a very inexpensive yearly rate.

7)      Contribute to your 401(k) up to your employer match – Never leave money on the table. If your 401(k) or 403(b) plan offers employer matching contributions, contribute at a rate equivalent to or higher than the match percentage.

8)      Pay down high interest debt – While there is never a one size fits all approach for this, paying down your debt is important. If you are paying 9% interest on your credit card debt, paying off that debt means getting a guaranteed return of 9% on your investment. This is a personal decision but it is often very helpful for getting you into a strong financial situation.

9)      Have an Emergency Fund – An emergency fund is a pool of money set aside for an emergency. There are different variables that go into what an emergency fund should look like, but having one is important. Emergency funds provide security and support when going through a new transition in life such as starting a family, or when an invariable unexpected life event shows up. You want this smaller amount to be set aside in a very safe and accessible account to access quickly if you need it.

10)       Spending Plan – The word budget can often feel annoying or restrictive, but having a system that works for your family can be helpful in allowing you to feel great about your financial situation. At our firm we use ‘M Guidance’ to help our clients aggregate their investments into one central location, and track their spending through a budget section. There are many other systems out there and they all have their own strengths and weaknesses. The most important point with this is to find a system that works, which can even include a simple excel spreadsheet to get started.

If you would like to learn more, check out our Back 2 Basics article or give us a call.

 

Kerry Meath-Sinkin is a registered investment advisor and financial planner at Meath Wealth Advisors based in Minneapolis. She works with clients not only in the Twin Cities, but nationwide. Kerry believes in a wholistic approach to finance.  She works with her clients to develop a practical plan with their finances, while also working on their inner relationship with money. Together, these aspects allow clients to feel healthy, abundant, and free. Click here to learn more about Kerry.