The process of starting a financial plan

Don’t wait to get started with your financial plan


After years of managing my own finances (and starting to get serious about retirement), I decided it was time to get a professional look at how I’ve been doing.  It had been over 20 years since meeting with a planner for the first time who suggested what I felt, was an impossible plan.  I couldn’t have afforded what he suggested and he gave me no direction or support in doing something.  In the end, it made me take no action at all and I suspect that that situation is true for many of us, who ultimately, bury our heads in the sand rather than take any action that may at least start the process.


I got referrals to four or so financial planners, had a phone conversation about my goals with three of them, then selected one to do the final plan.  I went into the process with eyes wide open, a flexible mind and hopes for a silver bullet investment.  I selected a fee-based planner so that I would not be solicited to buy investment vehicles


What I found:


There is no silver bullet.   My planner suggested my main investment should be an IRA.  I was very lukewarm about that because of how volatile the stock market has been.   If you can invest in an IRA over the long-term, it may work alright for you, but the closer you are to retirement, the harder it is throw the dice given the market’s volatility.


Getting a projection of expenses and retirement contributions up to retirement helps set priorities and is absolutely crucial in staying focused.  Once you know that, the after retirement income and expenses can be calculated.  The planner I worked with looked at this projection each year up to the time I thought my heirs would take over.  This component was probably the most important thing that came out of my meeting.  If that doesn’t spur you into action, I don’t know what will.


The planner gave me an annual financial goal that I felt was too unattainable (just like 20+ years ago!).  You have to make your saving attainable, or you won’t do it.  Just get started with what you can and watch it grow.  Once you see progress, you may be able to commit to more.


Social security is not likely to be enough income in your retirement.  The time to start saving could have been a long time ago, but that time is gone, so get started now.


Consider looking at a whole-life insurance policy taking an indexed-strategy in mind as an investment tool.  The income will grow and can be withdrawn when needed after retirement.  The other nice thing is that your principal is protected, which is not true in an IRA.


Pay yourself first.  This can get set up as a automatic payment into an online bank account, which has a higher interest rate than the brick and mortar banks.


Take a careful look at the tax implications of your choices.  IRAs are a key part of retirement savings, however the taxes can be high when you are required to start taking distributions.


Plan for big purchases like a principal residence, rental property, or car.


Take a look at long term disability insurance to protect your income during your earning years.  My planner did not have a high opinion of it, because it took away from money that could be used toward investments.  I felt strongly that I should maintain such a policy.


Take a look at long-term care insurance to take care of you if you cannot take care of yourself.  Health care costs are astronomical and can deplete all you have worked for pretty quickly.  You should look at how you plan on financing your incapacity as well as your capacity.


Do challenge your planner.  You are the one that must live with the choices you make.  Read information on the internet, talk to friends and get their opinions.  The more you read and talk to people, the more your own plan will start to materialize.