Building wealth is only half the job. Protecting wealth for your loved ones and yourself is equally important. Through estate planning, business planning, and asset protection, our firm will help you protect everything you love — family, friends and favorite charities. For more information be sure to visit our website where you will have access to our blog, events schedule and a complimentary newsletter subscription!
Financial planning works in tandem with estate planning and tax planning to create, protect and distribute your wealth.
What is a Comprehensive Financial Plan?
A comprehensive financial plan includes everything from a household budget, saving and investing, risk management and debt management, retirement planning, tax minimization and estate planning. Taking a pro-active approach with a financial plan can be the difference between creating wealth and living with financial limitations.
Start by determining your net worth—what you own minus what you owe. This can be a pleasant surprise, or a wakeup call. Either way, knowing your net worth and inventorying your assets and liabilities provides a starting point to create an effective plan.
It may be more important for people of modest means to have a financial plan – since there is a margin for error.
Create a Realistic Budget
Recording every transaction for a few months may be tedious. Nevertheless, it is the only way to understand how money is coming in and going out. Do not leave anything out, like online subscriptions, credit card finance charges, bank fees and even that fancy coffee you buy every morning on your way to work. It all adds up. Break out annual expenses like life, home, and auto insurance by the month.
If there is no “emergency fund” (e.g., many financial planners recommend having six months of your fixed expenses saved), then create one and include regular payments as part of the budget. The saying “pay yourself first” is a good reminder for both emergency funds and long-term savings. Even a small amount, saved regularly, is a worthwhile habit. When income increases, try adding the increase to savings as a painless way to build savings. Avoid the natural temptation to increase your consumption!
A budget can be done with a pencil and paper, a spreadsheet or special accounting software. How it is done is less important than actually doing it. Creating a budget is often treated like having an estate plan created or updated. It feels like it will take too much effort. However, when both are done, you feel more organized, and your family is better protected.
Can Some Expenses Be Eliminated?
Small items add up when considered from the long view. That $6 café mocha is an enjoyable treat. However, multiply it by a year and consider how the money might grow in a moderate growth fund or a 529 college fund. Unused gym memberships or subscriptions you no longer use fall into the same category. You may not get rich from skipping the coffee, but you might be able to pay off credit card debt sooner.
A Good Financial Plan Has Short and Long-Term Goals
Short term goals focus on eliminating debt, like college loans and medical bills. These items should be addressed in the monthly budget. Compare interest rates and pay off the debts with the higher interest rates first.
Long term goals are saving for a home, building college funds for children, retirement savings and investments. For many people, automatic paycheck deductions are the best way to move money into savings.
Estate Planning is Part of a Financial Plan
Estate planning protects both you and your family. Trusts pass wealth to the next generation. However, they are also used to protect assets from creditors and litigation. A last will distributes assets and personal possessions. Without a last will, expensive estate battles often ensue. If your estate is more complex and you want to avoid probate, consider planning with a “fully funded” revocable living trust. Estate planning also includes planning for incapacity. Having a general durable power of attorney and a medical or healthcare power of attorney eliminates the need for a formal guardianship or conservatorship powers, should you become incapacitated. This would save money and heartache, let alone preserve your financial and personal privacy.
Together with an estate plan, a financial plan creates peace of mind and the freedom to focus on living well with fewer worries about the future. Book a call with Vick Law, P.C. today to create or modify your estate plan to best fit your needs.
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