Taking the Mystery Out of Financial Planning

The point: You can get your finances in order and understand the whole thing

There are just 4 steps

When I got started in this industry I was overwhelmed with the barrage of terms, concepts, laws and products…and I was supposed to be the one who would advise others! My confusion disappeared in one short conversation with my training manager Bob Turley. Bob told me that if someone would gather 25 of the top financial planners in the country and ask them to give their opinion as to the steps needed to get your financial house in order that they would basically agree on the following 4 steps;

1. Necessities 2. Protection for Necessities 3. Money for the Future 4. Tax Strategy

1. Necessities - Here’s where you start.

You take your first dollars and buy food, shelter and clothing for your and your family - the necessities.

You don’t spend one dollar on anything else until these are covered.

2. Protection for Necessities 

Next step is to get Term Insurance on the breadwinners for the family. If both parents work, then get coverage on both. You don’t want the necessities to disappear for the family just because an accident occurs. They MUST be protected and provided for. But only buy Term, not whole life endowment or universal life or any other version of the high price spread that the whole life insurance industry loves to sell. Buy it for a dime instead of a dollar. 

It’s important but you don’t want to spend too much on it because you only have a 33% chance of dying before age 65. 

Only after the protection is in place should you think about other steps because the reality is that you could die tomorrow but you certainly won’t retire tomorrow.

3. Money for the Future

First you save, then you invest. 

Savings are “put and take funds.” Investments are “put and leave funds”.

Savings are for those emergencies that happen—a new roof, braces for your child, new tires for the car, etc. Six months of monthly income is a good target to go for. Once you have your emergency fund in place it’s time to invest. This is money you are going to put away for your retirement or even a college fund for the kids. You put this away and never think about touching it. You don’t want to jeopardize your future! A good stock mutual fund is a good choice for investing.

4. Tax Strategy

A good, intelligent tax strategy needs to be put in place at this point and it doesn’t have to be complicated.

For middle income people options are limited but they are powerful. 

Options like making the beneficiary of the term policies the owner as well so that the funds would escape the inheritance tax. Another is the IRA, the Individual Retirement Act that allows you to defer up to $5,000 annually ($6,000 if 50 or older) annually from your annual taxable income. If you want to use after-tax dollars you can put it in an Roth IRA and have your funds grow tax-free. These are just a few of the options available.

It’s no more complicated than that.

As simple as they are most people feel that they would prefer to have a professional walk them through the process of getting and implementing a plan. That’s been the reason behind the staggering growth of  the into independent financial services marketing organizations. They charge no fee and recommend only products that they use themselves. You won’t go wrong getting their advice and they are easy to find anywhere in the USA, Canada or Puerto Rico.

Hurry! Don’t wait to get your finances in order. It's not confusing and you’ll have a great peace of mind about your future.

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Feedback: Have you avoided financial planning because you thought it was just too confusing?