Key considerations for a solid financial plan

Tina Hurley, Senior Vice President | Head of Advice, Planning and Product

As a strategic partner who helps clients navigate and grow in changing circumstances, Tina is responsible for the direct management of the Wealth Management Product Team, including the investment platform and a team of Certified Financial Planners serving all segments of net worth.

If you’ve ever tried to take a long road trip, or navigate an unfamiliar city, you know how important it is to have the guidance of a good GPS or maps app. They can help you maneuver around obstacles, adapt to changing circumstances, and keep you on the right path to your destination.

A financial plan is a roadmap for your financial life. A solid financial plan could keep you on the right track designed to match your goals, whether that involves traveling the world, having kids, or taking care of aging parents.

A financial plan is a blueprint to help achieve your life goals, create financial stability, and grow your financial confidence as you work to address future needs, wants, and wishes. Just like your life itself, your financial plan is not set in stone and should grow and evolve as your life, goals, and circumstances change.

A comprehensive plan can remove financial stress and anxiety from your life, and your financial advisor can help mitigate this even more by developing that plan with you. The advice and experience of a professional can help you avoid predictable obstacles and keep you on track through any surprises that come up along the way. These advisors know the best practices to follow as you lay out the course of your financial journey.

To plan a trip, you need to have a destination in mind. Setting clear goals for yourself can focus your efforts and prevent wasteful spending that might pull you off track.

A goal is simply something you want to achieve, whether it’s for yourself or a family member. For example, you may want to buy a house, pay for your child’s college tuition, transition to another career later in life — or all three.

Like any journey, your planning should start with a foundational understanding of where you are financially and how you want to grow your finances. This involves a few key items to focus on, such as:

While you may not think you need to consider your net worth, this snapshot can give you an idea of your current financial position. From there you can look forward to where you want to go — with your feet firmly planted in reality.

A net worth statement documents your personal assets and liabilities. To determine this equation, subtract what you own (your assets) from what you owe (your liabilities). With this information, you can better understand where you’re starting from and where you want to go.

An itemized monthly budget is a list of your regular expenses that helps you see where you’re spending your money. What you uncover can help rein in spending, keep credit card debt under control, and improve your ability to save for short-term goals, as well as your future. It can also help guide you through the process to make sure everything is properly accounted for and advise you on needed adjustments.

This document reveals how your cash moves in and out of your bank account. To put this together, you’ll need to list your cash inflows from all income sources, including your job, stock dividends, property, or other ways you might earn money. Then, list the outflows from your spending on rent or the mortgage, food, tuition, loans and other liabilities and expenses.

Compare these inflows and outflows are combined to determine your net cash flow. A positive cash flow means you have more money coming in than going out, but a negative cash flow alerts you to money management issues you need to resolve.

With these two tools — a budget and a cash flow statement — you’ll have a better idea of where your money is going in black and white. A financial advisor can help guide you through the process to make sure everything is properly accounted for and advise you on needed adjustments.

You’ve probably heard how investing generally has higher growth potential than interest earned from deposits into CDs, savings accounts and other bank-offered products. However, this strategy can be intimidating for these who haven’t invested before. The first step is to outline your goals for what you will be using the money for, as the investment decisions you make will hinge on these objectives. Goals could include buying a home, funding education, or building your retirement income.

Next, think about your timeline. A portfolio designed to invest for the short term will look a lot different than one created to achieve a long-term goal. Your investments should be aligned with the time horizon of your goals.

By nature, all investing involves some amount of risk. And not all portfolios are created equal; the assets you choose for your portfolio should align with your comfort level when it comes to the risks associated with investing in those assets. This is important whether you prefer taking a conservative approach (low risk, low return potential), an aggressive approach (high risk, higher returns potential) or an approach in between the two.

A financial advisor can help to manage your portfolio based on your level of risk tolerance. Digital investing platforms provide automated, algorithm-driven investment services based on how you answer questions about your goals, time horizon, risk tolerance, and financial situation.

Now that you are growing your finances, mitigating your risk is essential. This can be done in many ways, but there are a few key plans that you want to think about to insure your financial health. These include the following:

If you have debt outside of a mortgage, it’s important to come up with a clear plan for paying it off so that you can keep the interest from growing out of hand. A little planning can go a long way in helping you cross those debts off your list. Start by listing all your debts, from credit cards to student loans to car payments, making sure to include the total owed, as well as the interest rate and minimum payment. Prioritizing small debts first can provide easy victories and keep up the momentum to pay them off. Another strategy is to focus on paying off higher interest rates to prevent balances on those rates from growing.

Your financial advisor can help you find programs and opportunities to make repaying debts easier. For example, debt management plans offered by credit counseling agencies will package several credit card payments into one and could even slash your interest rate in half.

Your retirement plan should identify your current retirement assets and how those assets are held. Getting a better understanding of what you have and how those assets fit into your plan will help you get the most out of them when you need them.

For example, how much you contribute to your 401(k) and how those funds are invested should change over time to do two things: take advantage of any interest or dividend income you may receive and adjust the risk profile of the account. Making larger contributions as early as you can in your career can give that money more time to grow. Not only that, a person with a longer time to invest before retirement may be able to be more risk tolerant. If the market dips, anticipated returns can later make up for these potential market swings.

An emergency fund could help you prepare for the unpredictable by providing a financial buffer to ride out a crisis. A healthy emergency fund should cover at least three to six months of living expenses.

To build this fund, make a point to set aside a certain amount of money each month until you reach a healthy level of funding.

Your family is always top of mind, and you want to be sure that they are cared for financially now and when you are gone. While some ways to protect your family may seem to be indirectly related to your finances, insurance policies are integral components in making sure you mitigate potential losses and maximize your returns every step of the way. Having adequate coverage is essential in financially protecting yourself and your loved ones in the case of an emergency.

There are many kinds of insurance that you may already be familiar with, like home, car, and health insurance. To provide extra financial protection, you may want to consider other insurance offerings like life and long-term care insurance.

Life insurance will provide a cash benefit to your spouse, or other beneficiaries in the event of your death to help protect them against lost income, funeral costs, and other expenses.

Long-term care coverage protects you in the event of an extended disability that leaves you unable to care for yourself. Without coverage, these costs can quickly eat through your retirement savings.

Because long-term insurance benefits could exceed the monthly insurance costs, your financial advisor can help you budget these critical expenses.

You are working hard to build wealth, reduce risk, and achieve your life goals. But what about after you’re gone? Who will carry out your wishes and inherit your assets? This is where estate planning comes into the picture.

While it’s not exactly fun to think about, many financial advisors would suggest starting an estate plan as soon as you become a legal adult. At this age, you’re suddenly responsible for things like your own finances, power of attorney, health care, and maybe even some relatively expensive assets, like a car or home.

Your will is the most obvious piece of an estate plan. This document is a blueprint for executing your wishes after your death, including what happens to your property and empowers an executor to handle that responsibility. (An executor is someone entrusted to carry out the terms of your will.)

Your estate plan should also include a legal directive giving Power of Attorney to a trusted individual to act on your behalf in the event that you are incapacitated. You will also want to have a legal directive naming a Healthcare Proxy to make medical decisions in case you are unable to make them yourself. Entrusting these powers to someone who is aligned with your wishes and values will ensure that big decisions–like end-of-life care–are made in your best interests if you are unable to make them yourself.

Although putting together a financial plan may seem like a daunting process, it is truly a critical one. But you don’t have to go it alone. A professional financial advisor has the knowledge, resources, and experience necessary to build a solid plan and guide you through turbulent times. They can help connect the dots to solve your financial challenges alongside you.

At Citizens Securities, Inc, our Financial Advisors will work with you to build a trusted relationship with you by understanding where you are both in life and financially. From there, they’ll develop a plan that can guide you on your path toward your goals and help you prepare for your financial future. Follow the link below to find a CSI Financial Advisor best suited to your needs.

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