Financial planning should be a priority in 2020.
Money is an important part of daily life.
You need to for food, bills, and other expenses.
As we say around the Krull household: “A dollar bill passes between many hands every day.”
It is also important for future expenses.
A recent Investor Business Daily article “Your 2020 Financial Plan Must Include These 5 Steps,” encourages people to prepare for these expenses through intentional financial planning.
What should you do?
Prepare for the worst.
It has been said that the “best defense is a good offense,” especially if the offense is a really great offense.
You could become incapacitated through accident or illness.
If you do not have advance health care directives or financial powers of attorney in place, you could lose both time and money as the court decides who can act on your behalf.
State law may even make these decisions for you.
You could also die at any time.
Be sure you have a last will or you will die intestate.
This means you have little to no control over your asset distribution and tax efficiency.
Estate planning and financial planning are inseparable.
Update beneficiary designations.
Beneficiary designations are a critical component of insurance polices, investment accounts, trusts, and annuities.
Reviews these periodically, especially after major life changes like remarriages or divorces.
Chances are you want your current partner or your biological children to receive your assets rather than your ex-spouse.
Beneficiary designations supersede directions in a will, so it is important to update both.
Create a written financial plan.
Your plan should have two (2) parts.
The first part is the next worth statement.
Include a list of assets and accounts in your financial planning.
These should include passwords and account numbers.
You also need to have copies of important documents such as birth certificate, marriage certificates, deed, financial statements, insurance polices, and work benefits.
Keep these copies safe in a waterproof, fireproof, locked location.
Part two of the plan includes investments.
Detail your goals, risk tolerance, time frame, and investments.
You should rebalance your plan based on changes in your portfolio and the market.
Put a budget in writing.
Start by prioritizing expenses in your financial planning.
What do you need to survive?
What is important to you?
Separate your needs (e.g., Chiefs tickets and apparel) from your wants (e.g., food, clothing, and shelter)*.
What can you cut out?
With a written budget, you can better understand how your financial resources are allocated and then adjust accordingly.
Review your credit report.
You should review this frequently.
Strategically, you can request one very four months.
Knowing your credit score is especially helpful if you are seeking a loan.
Taking these financial planning steps now will help you achieve your future goals.
*Just kidding. Well, maybe not. ;-D
Reference: Investor’s Business Daily (Dec. 30, 2019) “Your 2020 Financial Plan Must Include These 5 Steps”