In June of 2017, I wrote about the roadblocks to getting started on a financial life plan.
Assuming you have the motivation now (if you don’t, click here to read my previous article), where is the best place to start? In 2017 I appeared in a podcast for Stacy Fisher-Gunn, the creator of LivingUpp, an online community for self-care. The topic was “Getting Your Financial House in Order.” Here are my recommendations for kicking off your own financial life plan:
- First, if you have a life partner and/or kids, please make sure you have enough life insurance. It could be a fairly large amount for some people! Look at it like this: these people are depending on you for your income, and if you die right now they will be missing out on 10, 20, 30 years of your income. Do that quick math and get some life insurance! It doesn’t have to be expensive, especially if you’re fairly young and healthy. Unfortunately, I’ve had some young people in my practice die unexpectedly. Even if you can’t get as much as you need, any life insurance you do have will only give your loved ones more time to get on their feet and not have to panic. Insurance coverage for disability is equally important for the same reasons. If you need help, contact me.
- The second thing I’d start with is an estate plan; this is as important as life insurance, but you need estate documents even if no one depends on you financially. Presumably, there is SOMEONE in your life who will have to deal with the fallout if you die. Don’t make it any harder or more expensive for that person than it needs to be. You need a will, and financial and healthcare powers of attorney. You might need a trust if you have kids or a lot of assets, but you should talk to your estate planning attorney about it.
- Those first two items are just the bare minimum that everyone needs in their financial life to protect themselves and the people they love from the inevitable. Once you have that going, yes, start tracking how much you spend. You can go online and search for “best online budgeting tools” and try a few until you find one you like. Maybe it goes without saying, but keep your spending lower than what you earn, if you can. Most of us can cut a few of our “fun” expenses without even noticing it.
- Also make sure you have enough cash reserve on hand for emergencies. You will need enough to cover 3-6 months of expenses, or more if your job is uncertain. I also think it’s really important to list out your assets and liabilities, with the account numbers and company names if you can devote the time. That’s really handy, again, if you die and you were the one handling the finances.
- Finally, just start saving. We all know our companies aren’t going to pay for us to retire anymore, and Social Security benefits may be reduced in the future. Save the change from your coffee, or $5 a week, or $200 a month, or whatever you can. The earlier you start, the better, even if it’s a very small amount.
Sure, I think everyone should do a comprehensive financial life plan with me. But if you prefer to go it on your own, those are a few of the things I would do first to get my financial house in order.
And if you’d like to listen to the whole podcast, just click here.