Meet Your Future Goals with These Strategic Financial Planning Tips
by Scott Schmidt, Chief Financial Officer, U.S. Money Reserve
Financial planning sounds scary. It’s not. Here’s what you need to know to make the most of it.
If the idea of financial planning makes you balk, don’t worry — you aren’t alone. More than half of U.S. consumers believe they should have $10,000 or more in emergency savings, but more than half say they only have $3,000 or less combined in their savings and checking accounts, according to a study published by MagnifyMoney late last year. While that was up slightly from previous years thanks to a pandemic bounce (previously, the savings rate was under $2,000), it’s still far below what most financial planners recommend for an emergency savings cushion — and having that cushion is one of the first crucial things you should work toward when planning for a financially secure future.
While financial planning can seem like an incredibly complex, stressful, and even somewhat boring activity, it can ensure that you and your family are safe and secure well into the future. Here’s what you need to know to meet your future goals with the most important strategic financial planning tips.
Understand What a Financial Plan Is and Stick with It
Think of a financial plan as a road map for your future. It lays out the main points of interest you want to hit at certain times in order to ensure that you and your family have the needed safety and security for a happy, healthy, and fruitful future.
Financial planning often begins with getting a good look at where your finances stand in the current environment. That means dragging all your financial baggage, whether good or bad, out of the dark corners and laying it bare. It may mean that you discover some things you didn’t know about your spending habits. It may show you where you are bleeding money and where you need to do a bit more work to tighten things up. It may also show where your spouse may be spending or saving as well — and that can cause ripples in your relationship.
When you embark on any financial planning journey, it’s essential to ensure that you approach the process with an open mind and an open heart. Finances are stressful and often relate to deep and sometimes not fully acknowledged beliefs that you and your partner have held for a long time. The process of unearthing your finances can stir up a lot of emotions for many, and it’s essential to approach the whole thing with patience and kindness both for yourself and your loved ones.
The other thing to understand about financial planning is that its purpose is to give you more confidence around money and your finances. It essentially creates the guardrails that you’ll use to continue to move your life in the direction of your dreams. It’s an ongoing process that is geared toward making you feel more stable, secure, and safe no matter what life throws your way.
Set Short- and Long-Term Goals
The first and main point of financial planning is to get a handle on your short- and long-term goals. Want to buy a house? That takes lots of cash. How about sending your kids to college? That takes money, too. These are examples of short- and long-term goals that can help you get a better focus on what you want in your life and how you want to use your money to get there.
Short-term goals are goals that are more achievable in a shorter time frame: within months or a year. Examples of short-terms goal include things like creating and sticking to a budget or getting an emergency fund in place by the end of the year. You may also want to think about setting a short-term goal like paying off your credit card debt or paying off a small loan.
Once you’ve worked through some of these goals and made some good progress on them, it’s time to tackle those mid-term and longer-term goals. These can include things like getting life and disability insurance for you and your family to ensure that they are taken care of should something happen to you. It can also include things like paying down student loan debt or paying off a car. Doing these kinds of things can help ensure that you have enough money to aim for bigger things down the road.
Finally, it’s time to think about and tackle those longest-term financial goals: buying a house or having enough money to send your kids off to college or even beginning to think about retirement. These are massive expenditures that can take a big chunk out of your savings, so it’s essential to plan for where you want to be in the future. Perhaps you want a modest retirement rather than a lavish private-island version. Either way, those experiences take tons of cash, and that’s money you’ll need to earn and save.
Without a short- or long-term plan in place, you’re likely to miss opportunities to make and save money that could really help make your life a lot better in the future. One of the most challenging things to do is plan for and stick to a budget, but it’s the most critical step you can take to reach your financial goals, whether they exist in the near term or are well off in the future.
Consider Enlisting the Help of a Financial Planner
There are no bones about it: Financial planning can be difficult and frustrating. How do you know where to allocate your money for your goals? Should you put money into an emergency fund first or try and save for a house? How much should go into each bucket each month? Is there a way to leverage the money you already have to earn more without taking on more work?
This is where a financial planner can be a real boon. They can help get the information you need to make the most informed decision possible and find the best path forward for you and your family. They may recommend a specific mix of stocks and bonds or precious metals, CDs, and other financial tools to help you maximize your savings. They are experts and are required to pass extensive testing and obtain licensing in order to offer financial advice. It always pays to get the help of an expert when you’re trying to plan for your future. They can tell you how much insurance you might need and how much money you should save for retirement based on your goals. They keep up with trends in the marketplace to ensure that they offer their clients the best advice to maximize their income. All in all, it’s always worth hiring an expert to help you.
One key thing to understand about hiring and using a financial planner is that their services are not free. You should always ask about their billing structure and how they work. Some bill on an hourly basis, while others bill a quarterly or annual retainer fee. Still others take a portion of the profits they make from you as a percentage. How much money you have to work with can really determine the way a planner charges. Higher-end financial planners who manage large estates may have a specific amount of assets that you need to have in order to sign on with them. It’s essential to understand what a planner’s expertise and parameters are before signing up to work with one. In an ideal world, you want someone who charges a fee rather than takes a portion of your profits.
Additionally, it’s also vital to do your due diligence when signing up to work with a financial planner. Financial planners have different certifications that they must keep up to date to offer their services. Make sure that the planner you choose has a fiduciary duty to give you the best advice. Some don’t but instead simply have a requirement to suggest “suitable products” for your needs. This is a significant difference to note, as Consumer Reports pointed out in this 2016 story.
One other word of advice about working with a financial pro: While there are many who are on the up and up, it’s important to do your own research into the things a planner recommends before deciding to go all-in with one. It’s crucial to understand where your money may be allocated and what the risks might be. In that rubric, you also have to consider just how comfortable you are with the level of risk that the planner or advisor is suggesting you keep or take on. If they offer something well out of your comfort zone, take that as a red flag and walk away.
The Bottom Line
Getting your financial house in order may sound like a super-tedious, really stressful thing to do, but once you have gone through it and have a good, sound financial plan in place, you’ll find that you may have more peace of mind. Knowing where the boundaries lie when it comes to spending, saving, and growing your money can be empowering, and it can help offer you and your family security and safety in an unstable and ever-changing world.
At the heart of financial planning, strategy, and advice is the idea that you want to make moves now to ensure that you and your family are protected well into the future. The best way to go about the process is to set the right short-, mid-, and long-term goals so you can truly live the life you want and stick with the budget and advice that a trusted financial planner or advisor can give you. Ultimately, it will come down to your own parameters around risk and reward and what you need and want in your life. Once you have a sound financial plan in place, you’ll be able to chip away at those goals and truly live the life you want.
