Preparing for Financial Planning Month
A financial plan allows you to set retirement goals, health care expense goals, and even college goals for the long-term and short-term. Planning ahead of time for retirement ensures that you have enough money to retire, as long as you keep a close eye on your goals to keep them on track. If you do not have a financial plan yet, you’ll want to gather your finances together, including all forms of income, liabilities, and assets to get started.
Going over your current finances allows you to see if you are on track or if you need to make changes to meet your goals. This step should be done every year. If you are saving for retirement, that is not enough—you need to invest your savings. Interest rates on savings accounts are so low that they may not even cover inflation. Your goal should be living off the accumulated earnings from your investments, not your actual savings.
But, that’s not all. Without a financial plan, you may be far off the mark of what you need for all of your goals, which means the money you save and invest for retirement may not be enough. Part of creating a financial plan is deferring and/or reducing taxes and building wealth. Your financial plan changes over time along with life changes and financial objective changes.
Financial Plans and Estate Plans
Most think of estate plans as planning for your end of life. However, a good estate plan could be combined with financial planning to help defer and minimize taxes now and after your death. An estate planning attorney with business tax experience—or a business tax attorney with estate planning experience—such as the attorneys at France Law Firm, are able to help you create an estate plan and a financial plan to benefit you and your children. Here are some tips that should help you get started:
- Set financial goals. Write down what you need to save for and the approximate amount you think those goals will cost. Separate the goals by years: Where you want to be in 5 years, 10 years, 20 years, 50 years. If you are young, you may have a house, marriage, and kids in the future. This also means schooling for the kids (private or public), college, housing upgrades, and retirement.
- Know what you are spending your money on. What is your income and where is it going? What bills do you have? You need a way to lower bills and increase savings. About 20 percent of your income should be set aside for savings and debt repayment.
- Employment. Choose an employer who offers a retirement plan match. Contributing to a 401(k) decreases your take-home pay, but that could be part of the 20 percent you put aside for savings. If your employer matches your deposits, that’s more money for your savings.
- Emergencies. Have a separate fund set aside for emergencies. Unexpected bills run up credit card debt and wreck your financial planning. Even if you start small—with about $500 or so, you can add to your emergency account each month. You’d be surprised at how fast that balance goes up with $20 each week.
- Get rid of high-interest debt. If you have a high-interest credit card or other debt, pay that off as soon as you can. A debt management plan could put several of these expenses into one payment at a lower interest rate. You’ll save more over time.
- Invest. When you invest your savings, you will gain interest to add to that savings. Even if you just invest in a 401(k), you will be earning more interest than in a regular savings account.
- Create an Estate Plan. An estate plan protects your savings and investments should you become incapacitated or suddenly die. Certain types of trusts help lower taxes and keep some creditors from getting your savings.
Working with a business and estate attorney to create a financial plan and an estate plan helps you save more for retirement, and ensures that you are not caught short because you need more money for any of your goals than you thought. Contact France Law Firm today for a consultation regarding your financial plan.