Resolutions for Good Financial Planning

As we enter 2019, some may be left wondering “where has the time gone”? For many of us, taking stock of the previous year, vision planning, and goal setting for a new year is par for the course. The first of the year is when we tend to get serious about mapping out our physical health and fitness or becoming more involved with our communities and families. For those of you thinking about assessing your financial wellness, this article is for you! This topic can seem overwhelming and complicated, seeming like an intimidating goal to set in the new year, but we assure you, that is not the case.

When you find yourself at a point where life is kicking into high gear, i.e., your career is taking off, income is growing, children develop busy schedules; these competing priorities can really take a toll on you and your budget.

It’s the perfect time to make sure you are taking care of the basics that will take your finances to the next level. If you are examining your spending in the New Year or creating/re-setting your budget, follow this simple tip: The 20/60/20 Rule.  Allocate your income as such: 20% savings/investments, 60% essential expenses (housing, insurance, debt), and 20% discretionary expenses (entertainment, clothing, personal care). Any time you find it difficult to save the allocated 20%, your essential or discretionary spending may be off. The rule can be applied in most households, no matter your household income.

When considering goal-based investing, break your goals down to how much money you will need and when you will need it. This will allow for more strategic investing options. Goal-based investing also allows you to more closely monitor progress and adjust your approach as time goes on.

Short-term goals (1-2 years): Safety is important. You want to know your money is accessible when you need it. Such as an emergency fund or a medium-sized purchase.

Mid-term goals (2-10 years): Safety is important, but to reach these goals, you need your money to work a little harder and grow for you. Think: new furniture for the house, a new car, or a new home.

Long-term goals (10+ years): Growth is critical since these goals are often the most expensive and the most important. Starting now and leveraging the power of time to compound your money can help maximize growth. Most commonly funding college tuition or starting a business.

Retirement: Maximizing your savings is critical to ensure you can fund a retirement that may last more than 30 years. No matter how you envision your retirement, with a clear vision of your goals, you’ll be more likely to achieve them. From a saving perspective, your greatest tool is time. You’ve likely heard the phrase “save early and often”. What you probably haven’t heard is “diversify where you are saving”. A 401(k) and IRA, in our opinion, are staples in any retirement plan, but relying exclusively on them can leave you short if you look to retire prior to age 59 ½ or with too much taxable income in retirement. When saving for retirement, consider working to balance into Taxable, Tax-Deferred, Tax-Deductible, and Tax-Free accounts.

It’s time for a gut check: are you on track to achieve your goals? Even if you’ve been diligent about saving, it can be hard to measure your progress against specific goals, especially if you save mostly in one giant investment “bucket”, such as your 401(k) or a general savings account.

A good financial plan will map out all your goals and should show you not only how you are tracking to meet your goals, but also the options available to you if you are short on meeting them.

A solid financial plan should focus on protecting what you’ve built so far while also planning for the future. Lack of protection can put your entire plan at risk and you’ve worked too hard to get you and your family where they are today. Think about the goals you have. They likely require money, and most are funded by your income; the biggest asset you have in your working years. Here’s how you can help protect it:

Protect your Growing Paycheck: Having disability insurance coverage through your employer is a great start, but group plans may offer only a fraction of the benefit you need to protect your lifestyle. Evaluate your current coverage and consider closing any gaps with individual disability income insurance.

Revisit your Life Insurance: Review your coverage to make sure it is right for what you want it to protect. Work with a financial professional to help you understand what amount is appropriate for you and what type of life insurance best fits your needs.

Update your Estate Plan: Take time to review your beneficiaries, wills, trusts, and powers of attorney to make sure they’re still appropriate.  Especially if you have:

Married, had kids or accumulated significant assets

Divorced or become widowed

Become part of a blended family

Received an inheritance

Started a business

If stepping up your financial wellness is your New Year’s resolution, you have already won most of the battle. Financial planning is not just about sacrificing fun and money today so that you will have more later, but rather a holistic approach to balancing your need for future goals and your desire to “Spend Your Life Living”. Focus, surround yourself with a good team and be patient because the financial goals you set today will build and maintain your future financial wellness.

*Sponsored Content
Devin Greer and Andrew Snyder are Financial Advisors in The Woodlands. Both native Texans, they serve their clients and help them dream their best life, define it precisely, and deliver them into reality through a premier financial planning and wealth management experience.
This publication is not intended as legal or tax advice.  Financial Representatives do not give legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor. All investments carry some level of risk including the potential loss of principal invested. No investment strategy can guarantee a profit or protect against loss.
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries. Devin Lacy Greer and Andrew Michael Snyder are Insurance Agents of NM and Registered Representatives of Northwestern Mutual Investment Services, LLC (NMIS) (securities), a subsidiary of NM, broker-dealer, registered investment adviser and member FINRA (www.finra.org) and SIPC (www.sipc.org).

Devin Greer
AR License: #11123192
Andrew Snyder
AR License: #8666816

 

 

Does Money Grow on Trees?

Transitioning from high school to the next chapter—whether that be college, trade school, work, etc.—requires the ability to be prepared academically, emotionally, physically and financially. As parents, we take eighteen years preparing our children for all of these things, and yet when graduation approaches, we wonder if we have done enough.

Regrettably, we tend to give little attention to educate our young adults about finances as they step into this next phase of life. While it is important to talk about money early on with our children, it is even more critical to have these conversations as they get ready to go out on their own.

As a mother of two children in college, I realized a number of years ago how seldom my own children handled physical money. With most of our financial systems now automated, it is becoming increasingly more difficult to teach the value of money when it seems to show up magically, with the click of a mouse or push of a button. While some high schools teach finance courses, few of them deal with day-to-day, practical concepts.

Most of our children now are very adept at using systems like debit cards, credit cards, Venmo and other electronic fund-transferring systems. However, they need to understand both how to budget for each week or month and the difference between spending and discretionary spending.

To start with, I recommend having your child write down all the items they spend money on each week and month. Next, help them become aware of additional expenses.

My son is just entering his senior year of college, and I have tried to help him build on this concept with each new school year. For example, I recently worked with him to create a detailed list of all expenses he will incur when he graduates from college and enters into the working world. He was amazed at how much the average person needs to spend each and every month.

Once you have identified the expenses, discuss which items are essential and which are discretionary. This may involve some interesting dialogue. Next, give your child actionable steps. I recommend making them personally responsible for paying a certain number or percentage of their own expenses. You may choose to give them money regularly to cover these expenses, or you may have them not only be responsible for knowing the cost of things, but also for paying with money they’ve earned themselves.

In either case, it is important for them to get in the habit of paying for things themselves—essential items first, discretionary items after. No matter the age of the child when you start this process, each year you can build on the number of expenses they are responsible for weekly and monthly.

I acknowledge that, as parents, it is often easier just to pay for all these items ourselves. However, as with all learning, it takes discipline and time. If you engage with and help your children practice, they will have a much better understanding of what things cost and how to pay for them—an understanding they’ll keep for the rest of their lives.

Kristin L. Young CRPC®
Private Wealth Advisor, Ameriprise Financial, Inc.

Kristin Young, along with her two children, has lived in The Woodlands for over 17 years. Her son and daughter are currently studying at Texas A&M University. As the owner of Kristin L. Young, an Ameriprise Private Wealth Advisory practice, for over 25 years, she has dedicated time in her practice partnering with clients who are going through financial transitions. Having both her business and home here in The Woodlands, she is intrinsically involved in the community and loves to travel.