BY AL SEYMOUR, ChFC®, CLU®, CRPC®, CASL®, AEP®, CAP® Wealth Manager
October is National Financial Planning month, so let’s focus on what financial planning actually involves. It’s not just about investment or insurance products; it’s also about the feelings behind your wishes and desires. Let’s call it a plan of action that is flexible enough to handle the twists and turns of your life. This “plan of action” is tailored to each specific person, but often includes the following important items:
- Establishing Goals: Knowing what your priorities are and identifying how much you will need to fund each goal is significant for financial planning. It doesn’t matter whether it’s for education, a home, retirement estate, vacation, or anything else, you must plan carefully for each. You will need to consider the effects of taxes and inflation as well.
- Creating a Budget: The first step for any financial plan is creating a budget. In essence, this is how much money comes in and how much goes out, or as most of us know it, income versus expenses. Budgeting is important in determining where you will get money to fund your various financial goals. Your net worth, calculated by assets minus liabilities, is also measured to track the progress you are making toward your objectives.
- Insuring Your Future: Determining whether you have sufficient disability, life, or long-term care insurance is important and often overlooked for several reasons. For instance, some people just don’t like insurance in general while others object to the cost. Think of it this way: if you don’t have sufficient coverage then you may have to spend down assets saved for other goals, such as your child’s education or your retirement.
- Analyzing Your Tax Situation: Do not pay the IRS more than is necessary; your goal should not be to see how much of a refund you can get, but focused instead on balancing the amount you pay so as to use your money to fund your goals on a monthly basis. Your accountant or CPA should be able to assist you in determining the appropriate amount needed for withholding or estimated tax payments. You could also help manage the amount of taxes you pay on growth of investments by using your company’s qualified plan, your IRA, Roth IRA, annuity, and even life insurance. Understanding how each works is essential.
- Planning for Retirement: This is perhaps the greatest long-term goal most people have. Few companies still offer pensions, so taking full advantage of your employer’s retirement benefits (401(k)/403(b)/SIMPLE IRA…etc.) is extremely important. Knowing what these benefits are and putting together a strategy to maximize your retirement savings in accordance with your budget is of equal importance. The managing of your retirement dollars will determine how much income you will have throughout your retirement years.
- Estate Planning: Understanding how assets pass at your death can be crucial to ensuring that your estate is dispersed per your wishes and not determined by the court system. There are many intricacies of estate planning, but a comprehensive set of estate planning documents should include a Last Will and Testament, Financial Powers of Attorney, Advanced Health Care Directives, and possibly a Revocable Trust.
Comprehensive financial planning can provide you with a clear plan of action. Our clients find that it is easier to understand how all the pieces of the puzzle come together to create peace of mind. At Marzano Capital Group we call it the “Pursuit of Peaceful Prosperity.”