What new goals are you going after in 2019? Have you decided to improve your physical health by fine-tuning your diet and adding a new exercise routine? Are you focusing more on improving your emotional well-being and strengthening relationships in your life? Or is your focus primarily set on taking your career to the next level this year?
These are all worthy goals, but we urge you to include one key goal that many overlook: setting up your financial plan. For most, it’s one of those things you know you should do but keep putting off. So why not make 2019 the year you finally take care of this important aspect of your financial security? After all, having a solid plan in place is a vital first step toward achieving your financial goals. Here’s how you can get started.
1. Create Your Budget
This seems elementary, however, it’s so common sense that it’s often overlooked by many. The foundation of any financial plan is knowing exactly how much you earn, how much you spend, and what you spend it on. So your first step is to record everything you spend for at least three months (the longer, the better). This can be done by carrying around a small notebook, entering your expenses into a budgeting app on your phone, or automating the process with a service like Mint. You can even check with your bank to see if their app has one of these tools built in. At the end of three months, calculate your average monthly spending for various categories (food, entertainment, utilities, clothes, gas, recurring bills, etc.). If you’ve never done this before, I bet the results will surprise you!
2. Set Financial Goals
Now that you have a clearer picture of where you are now, it’s time to define where you want to be in the future. When would you like to retire? At what level of luxury are you planning to live? How much will you need in your retirement account to afford this quality of life? And while retirement is a big part of financial planning, it is important to include all of both your short-term goals and long-term goals. Do you want to move into a new lake house in 10 years? Pay for your children’s education? Donate to charities? Write it all down and make sure your plan is set to help you achieve all your goals.
3. Design A Savings Road Map
Once you’ve defined where you are now and where you’d like to be, it’s time to make a plan to bridge the gap. Assuming an average income and return on your investments, how much do you need to put away each month to reach your goals on time? Does your budget allow for this? If not, what steps can you take to either reduce your monthly spending or increase your monthly income?
4. Put Together Your Portfolio
Unfortunately, stockpiling your savings under your mattress won’t get you very far. The key to achieving your financial goals is creating an investment portfolio strategically diversified to meet your personal needs. The earlier you get this started, the more you’ll benefit from the exponential power of compound interest.
5. Define Your Exit Plan
The last part of your plan is creating exit strategies for each goal. You need to be able to access your money when you need it. If you skip this step and just dump all your savings into retirement accounts, you’ll be in for an unpleasant tax surprise when you want to pay for the aforementioned lake house or college education. So keep in mind when you’ll need to access your money and how to set up your portfolio accordingly.
6. Schedule Check-Ins
Once you’ve set up your plan, you’re well on your way, but your work’s still not quite finished. Just as important is taking the time to periodically maintain. You’re bound to experience many life changes between now and retirement, and you must adjust your plan accordingly. Check-ins are easily brushed off and forgotten, so it’s best to schedule them into your calendar. As a simple rule of thumb, we suggest you aim to review your progress every six months or whenever your life situation changes (income change, change in expenses, change in goals, etc.).
Next Steps
Setting up a financial plan is simpler than you may have thought. However, while a tried-and-true process can make it simple, it does not necessarily mean it’s easy. You can quickly find yourself hung up on the details and become overwhelmed. Fortunately, there are professionals ready to help you through every step. Our team members here at Haydel, Biel & Associates (HBA Wealth) are experts in designing personalized financial road maps to help people achieve their goals. If you’d like to learn more about how we can help you set up your financial plan, call us today at (626) 529-8347 or email Ricky Biel directly at ricky@hbawealth.com.
About Haydel, Biel & Associates
Haydel, Biel & Associates is an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at ricky@hbawealth.com.