As of late I have found myself in the middle of many conversations where the topic of financial literacy arises, and the lack of awareness that exist around budgeting and credit, savings and investing, and insurance planning.  As a kick-off to a new decade, “Back to Basics: Financial Planning” seems like an appropriate place to start. 

 

“All you need is the plan, the road map, and the courage 

to press on to your destination.”

– Earl Nightingale

 

So, what is Financial Planning? 

​

Financial Planning is deciding what you are going to do with your money. Essentially creating a strategy for your financial goals, such as: the purchase of a home, paying for a child’s education, paying-off debt, all possible while saving for retirement. 

 

Creating your financial plan can take a significant upfront investment of time, however, documenting your goals can help you save time, money, and stress in the long run.  Having a plan in place can help you set milestones and celebrate your achievements, and hopefully help keep your finances healthy today, and for years to come.

​

Factors to consider when creating a Financial Plan:

​

​Developing a Financial Reserve
Being prepared for unexpected expenses can help relieve financial anxiety. Ideally, I believe you should aim to set aside 6 to 9 months of living expenses. One way to help do this is by setting up an automatic, recurring transfer to your savings account. Preferably your savings will grow, and you may not even miss what you save each month.  Although this may seem difficult at first, I recommend a shift in mindset, from saving whatever is left from your paycheck, to prioritizing savings first, and living off of the remaining balance. 

 

​

“If we command our wealth, we shall be rich and free.

If our wealth commands us, we are poor indeed.”

– Edmund Burke

​

Get Rid of High-Interest Rate Credit Card Debt
If you are carrying a balance and paying interest on your credit card each month, I recommend you try to cut down on your card usage and pay more than the monthly minimum. Finding a different credit card with a lower interest rate, or promotional introductory interest rate offer can also help you pay off your balance more quickly.  The key is to be disciplined, and focus on paying down debt, not to find yourself with a new credit card with increased spending power. 
 

“A budget is telling your money where to go instead of wondering where it went.” 

-Dave Ramsey

 

Develop a Household Budget

Think of a budget as creating awareness of where your money is spent. Understanding how you spend your money can help you see how to save it. For example, that $5/day Coffee Beverage, equates to $150/mth or $1825/year, over 10 years- that number is $18,250. There are many online banking tools to help you categorize and control your monthly spending.

 

Saving for Retirement
Your retirement lifestyle depends on decisions you make well before retiring.  Imagine taking full advantage of your companies’ 401(k) or respective workplace retirement plan. Participate in the plan by contributing as much as you can, at the very least attempt to maximize any employer match offered if they offer one.  Consider contributions to a Traditional or Roth IRA if it makes sense for your situation.  For Business Owners, setting up a 401k Plan, SEP-IRA, Defined Benefit and/or Profit Sharing Plans are something I think you should consider.  If there’s already a plan in place, get a second opinion to ensure the plan is optimized for the benefit of the participants as opposed to the investment management firm.  

 

Be Sensitive to Taxes
I believe no one likes to pay more income tax than necessary. I recommend you keep proper records of potential deductions like mortgage interest, state and local taxes, charitable contributions, certain medical expenses, education loan interest, business expenses, etc. You may also be able to take advantage of tax deferral or preferential tax treatments on your investments. Speak to your CPA or Tax Professional for guidance on what deductions you may be eligible for. 

 

​

“All successful people men and women are big dreamers. They imagine what their future could be, ideal in every respect, and then they work every day toward their distant vision, that goal or purpose.” 

– Brian Tracy

 

Goal Setting
I believe goals are the ultimate driving force behind your overall plan. Your list of goals should include your short, mid, and long-term goals. These goals should be realistic and specific. Short term goals are within one year, mid-term goals are between two to five years, and long-term goals are greater than five years.  For example, if your mid-term goal is to buy a new home within the next 3-4 years, research the cost of homes in the neighborhood you desire, then figure out the cost of a down payment and take the relevant steps to improve your credit score. 

​

“Know what you own, and know why you own it.” 

- Peter Lynch

 

Have an Investment Strategy 
Online investment platforms have made it relatively easy to invest in stocks, bonds and mutual funds.  However, investing or trading in investable securities should not be confused with having an investment strategy.  I recommend leveraging the expertise of a financial advisor, who is able to assist you, your family or your business with asset management, taxation strategy and insurance planning. 

 

“I am prepared for the worst, but hope for the best.”

-Benjamin Disraeli

​

Are you adequately Protected?
Insurance helps provides protection against the unknown. I think you should make sure your possessions, home, life and health are adequately insured. Review the deductibles and the coverage amounts to get the protection you want. Consider an umbrella liability policy for additional coverage above what is provided in your homeowner and auto policies.

 

Estate Planning
A well-thought-out estate plan determines how your assets will be distributed and can reduce estate taxes. I suggest you designate a durable power of attorney to make financial or healthcare decisions, in the event you're incapable of making them yourself.

 

Organize your Records
Having a system for handling expenses and keeping organized records can save time and may reduce stress.  Having a trusted family member or Power of Attorney who knows where your important legal and financial documents are in case of an emergency can provide peace of mind during difficult times. 

 

Financial planning is more than just numbers on a page. It can help you create an opportunity to realize your dreams, enjoy a great retirement, provide security for you and your family, leave a meaningful legacy and much more.

 

“The secret of getting ahead is getting started. The secret to getting started is breaking your complex overwhelming tasks into small manageable tasks and then starting on the first one.” 

-Mark Twain

 

As Dolly Parton says, 

 

“Never get so busy making a living that you forget to make a life.” Happy New Year! Wishing you and your loved ones a happy, healthy and blessed 2020!

​

​

​

​

​All written content on this site is for information purposes only. Opinions expressed herein are solely those of Samra Wealth Management, A Member of Advisory Services Network, LLC.  All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed.  All economic and performance data is historical and not indicative of future results.  All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only.  This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor.