If You Fail To Plan, You Plan To Fail

The importance of creating and following Your Financial Plan.

As we launch into the second quarter of the year, it is the perfect time to reflect on the almost forgotten New Year’s resolutions we were all determined to accomplish in a post-2020 world. From dusty Pelotons to unused juicers, these first steps to reach health and fitness goals are often the only step taken. The pursuit of financial success is no different. Most everyone understands the need for life insurance and saving for retirement; however, many unanswered questions remain on how to successfully create and follow a financial plan.  

• What type of life insurance is best for me and how much benefit do I need?

• How much do I need to save? For retirement? For an emergency?

• Should I be saving to an IRA, Roth, or participating in the retirement plan provided by my employer? 

It is commonplace to not have clear answers to these questions and likely the main reason people settle on taking no action at all. This is where creating and maintaining a financial plan comes in to play.

How do you get started?

Designing a financial plan combines being intentional with your money and identifying both what your financial goals are and how you are going to reach them. Mind you, this doesn’t need to be an overly complicated process. Nelson Murphy Insurance & Investments (NMII) has helped thousands of households over the years go from feeling they are not doing enough to being comfortable and confident in the decisions they are making financially.

1. Get Organized

We recommend using a financial tool to aggregate all of your accounts in one place. There are plenty of options available, but we offer the best-in-class tool here. Take a moment to get started with this free tool and reach out if you are interested in full access or have questions.

2. Create a Spending Plan

After all, you need to know where your money is going to be able to identify how much you can save.

Hint: Aim to follow the budget rule of 50% needs, 30% wants, and 20% savings.

3. Identify Your Goals

Your goals are specific to you. Whether you are planning for retirement, seeking proper insurance, or have other goals in mind, identifying them is a necessary step to making them reality.

4. Quantify Your Goals

A common saying around NMII is “financial planning is a simple calculation of Math + Behavior!”

Take a moment to answer the following questions:

• How much income replacement will you need in retirement?

• Do you expect your income tax rate to increase or decrease once you retire?

• How long do you plan to work?

5. Create a Realistic Plan

Once you quantify your goals, it is time to determine what is needed to make them a reality and ensure you implement a plan easily followed.

6. Review and Adjust

Plans change and life evolves. It is important to revisit your plan every few years or after major life changes to make sure you stay on track.

Expert tip: Make small, incremental changes over the next several years to reach your goals rather than large, unsustainable changes today.

If you were to do a basic Internet search, you will come across several rules of thumb to assist you in quantifying your goals. However, your circumstances are unique to you and your plan should be tailored to your life. We have a team of trusted advisors who are happy to help provide guidance and assist you on your journey to financial success.

So dust off the Peloton, now is the time to revisit those year-end resolutions and start being more intentional with your money.

Bruce Aken, CFA

Partner | Wealth Advisor