Yes, this is the year to take full control of your life and personal financial planning is the key! In my entire career, working with some of the most brilliant and educated people, I’ve found that most of the population still remain clueless about personal financial planning and are virtually unprepared to achieve their ultimate financial goals, much less plan for any unforeseen circumstances such as the death of the family’s breadwinner.
Here are 9 Tips for Successful Personal Financial Planning:
Keep both partners involved in financial affairs.
Often, only one family member is in charge of financial affairs, while the other partner is completely left in the dark. While it’s a good idea to have one spouse “in charge,” both should remain involved in major decisions regarding financial planning and in any important meetings with accountants and lawyers.
Put your life goals on paper.
Write down your specific financial goals on paper – in a notebook, white board, or any accessible location. List them in the order as they come to mind, but then review and sort them according to importance.
Set a family budget.
Calculate all incomes generated by contributing members of the family and based on these figures, set a reasonable spending budget for household bills, miscellaneous spending, and of course, saving!
Insure items in your home up to their replacement value
There is a such thing as “replacement cost coverage” through which, the items in your home are insured based on the cost for replacement, as opposed to “actual cash value,” which covers items at their present value. The cost of this insurance is usually a bit extra per year, but well worth it!
Create an emergency fund
The average American family may have enough money to cover their monthly expenses, however, any emergency that could possibly come up, such as car trouble or a broken water heater, could cause severe financial hardship. Budget for these emergencies and aim to have at least 6 months of spending money available for emergencies.
Understand your employee benefits
Sure, employee benefits can be pretty hard to understand. However, a few components to pay close attention to are your 401K, disability coverage, and life insurance benefits. You’ll want to make sure you maximize your contribution, especially if your company matches it.
Purchase disability insurance
Along the same lines as the previous tip, be sure to purchase disability insurance – either through your employer or through the private sector.
Diversify your investments
If you have investments such as mutual funds, stocks and bonds, be sure to speak to a financial planner about diversifying these funds.
Prepare a will
Believe it or not, this is very important, regardless of the size of your estate. While these can be easily prepared online or through a general practice attorney, consult an estate-planning specialist for larger estates.