Introduction

Financial planning integrates your lifestyle with your long-term goals, equipping you and your family to best prepare for the future. Planning can feel tedious and overwhelming, but your future self will be grateful you did the work now. Like with most things in life, financial plans are not black and white, but flexible and designed for your unique circumstances.

What is a Financial Plan?

A financial plan is a comprehensive analysis of your financial situation, and the steps needed to take to reach your financial goals. Financial plans reveal where you need to adjust your lifestyle to get back on track. The time horizon of a financial plan depends on your goals and how far away you are from achieving them. Financial plans are flexible, providing cushion for medical emergencies, marriage, the birth of a child, and other life events.

Components of Financial Planning

• Budgeting is an important component of planning because it reveals your income sources and expenses, your assets and liabilities, and your financial strengths and weaknesses.
• Investing is another component, because it is important for building wealth and moving towards retirement if that is your goal.
• Retirement planning looks at your retirement and social security income and assesses the lifestyle you want to live during your retirement.
• Estate planning looks at inheritance tax estimates, any wills, and plans to give to philanthropic organizations.
• Tax planning deals with 401(k) and IRA contribution plans and returns on capital gains and income tax.
• Risk management has to do with LTC, disability, and life insurance. It also ensures beneficiaries and survivor benefit plans.

Determine Your Financial Goals

This step is vital to crafting your plan for what your needs are. Gather short-term and long-term goals but focus on looking at the whole picture of your financial future. These goals could include buying a home, retiring at 65, or paying off debt. Be honest with yourself about what you want out of life and how that translates financially.

Determine Financial Situation

It is important to know what you own verses what you owe. This will help in calculating your Net Worth, the value of everything you own. Knowing how much money you are bringing in and how much is going out is also important for budgeting and assessing where adjustments can be made.

Construct Plan

Next, piece together a plan outlining the actionable steps needed to stay on track. This typically involves saving money for retirement, building an emergency fund, and saving for traveling or desired purchases. Investing will also likely be part of your plan, because it is the optimal way to build wealth. You will need to discern your preferences and risk tolerance when building an investment portfolio. Paying off any debt is usually a piece of the plan, whether it’s car loans, student loans, or credit card debt. Building credit could also be a part of your plan if you are wanting to make big purchases, like a home or new car. Certified Financial Planners are educated and qualified to provide recommendations regarding your specific situation.

Implement Plan

Now, it is time to act. Once you have created your plan, you can now implement these adjustments to your everyday life. If your plan includes some extreme cutbacks to how much you are spending or increasing your savings, it is okay to start small and build up to your goal. Taking things incrementally will give you a better chance of sticking to the plan. Remember to stay flexible when things inevitably change.

Periodically Review & Revise

We are all faced with challenges and changes, making it important to reassess your plan and adjust accordingly. Adjustments like lengthening your timeline, saving more, or changing your goal altogether will help guide you back to the path.

Conclusion

A financial plan will help you manage your wealth wisely and keep you on a path towards the vision you have for your life. Seeking out a financial advisor is a great place to start when beginning this journey. Lets all take a leap towards a lifestyle that complements our finances.

Matt’s Corner

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The post The Canvas & Paint of Financial Planning appeared first on New Century Investments.

Introduction

Nobody wants to have a loved one pass away and not be able to access their belongings with ease during a time of grief. Unfortunately, this is the case for many. Not having beneficiaries on your account and policies can be detrimental to your family members and loved ones who are grieving your loss. Taking the time now to review and update your beneficiaries will leave a lasting impact on those you care for.

Why?

Designating a beneficiary is important because it ensures that your assets will be transferred to the place you desire. You can name beneficiaries on life insurance policies and investment or retirement accounts. Typically, with a life insurance policy, the chosen beneficiary will receive some benefit that the policy pays. With investment or retirement accounts, the balance of your assets will transfer smoothly to your beneficiaries.

Naming a beneficiary is not required, meaning we need to take the responsibility to ensure our beneficiaries are updated across our holdings. Once you pass away, and you have no beneficiaries, the financial products you own will not be governed by your will anymore. Without beneficiaries, there is no clear answer to who is entitled to your assets. This creates a lengthy and grueling legal process to determine how your assets are distributed. Probate is one of those processes that gives power to the court to decide where your assets are distributed.

How?

With any financial service, you should be able to designate beneficiaries through the website or filling out a form. When setting up accounts through your employer, you can also have them keep your beneficiaries on file. If you work with a financial professional, they will also keep up to date with your beneficiaries.

A beneficiary can be a person, charity, trust, or your estate. Typically when choosing your beneficiaries, the immediate people who will suffer financially, will prioritized as beneficiaries. When naming beneficiaries, you can also split the benefits across multiple names. For example, say you have 3 children, and you want to split equally across them. They would each receive 33.33% of the assets in that account. It is important to research state laws before naming your beneficiaries on your accounts. Beneficiary laws vary by each state, and some states make it a requirement to list your spouse as your primary beneficiary. Updating beneficiaries happens in specific circumstances, such as divorce, remarriage, or the death of a loved one who was one of your beneficiaries.

When designating beneficiaries, you will likely provide the full legal name as well as their relationship to you. When providing beneficiary information, be as detailed and thorough as possible. This will ensure that the benefits entitled to your beneficiaries will be expedited to them as efficiently as possible.

Conclusion

To secure the financial stability of those important to you, consider naming, reviewing, or updating your beneficiaries. The whole purpose of this system is to be able to honor your desires once you are no longer here, making it advantageous to put thought into the futures of your loved ones today.

Matt’s Corner

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The post Secure & Honor: The Importance of Beneficiaries appeared first on New Century Investments.