Building Your Own Financial Plan

In my last blog, I talked about why you would not want to build your own financial plan. Well, if I couldn’t convince you, the guilt of thinking about you duck taping a plan together is too weighty for me to carry around. So, instead of keeping our secret formula locked in a vault, I thought I would share with you what we have in every client’s financial plan. If after reading this, you still want to build your own financial plan, I am proud of you and offer my heartiest congratulations. I hope it works for you.

What Every Plan Needs To Cover

Liability – One of the most overlooked places in someone’s plan can be their protection component. Sadly, we live in a very litigious society. There is a reason why every highway is full of billboards with attorney ads and their cheesy slogans; it’s because there is good money in suing people. Therefore, you have to protect your family by looking for holes in your insurance portfolio. Make sure you keep a close eye on your home insurance, auto insurance, LTC insurance, umbrella coverage and life insurance. One pro tip is make sure your deductibles match your emergency savings. Many families keep their deductibles too low, even though they have plenty of emergency savings to justify a higher deductible.

Estate Planning – Probate is a snare that enslaves many beneficiaries unaware of its terror. Okay; probate is simply a court of law that distributes your assets after you are gone, assuming you have any probatable assets. When building your financial plan, you need to confirm that you have all your basic legal documents in order, such as a Power of Attorney, Living Will and Last Will. One pro tip is to make sure all of your bank accounts have a primary and contingent beneficiary. You would be shocked to learn how many people have bank accounts without any beneficiaries at all.

Tax Planning – Tax planning is more than trying to increase your tax refund every year. When you build your financial plan, make sure to consider your tax liability on all of your assets. Over time, your goal should be to move toward tax-free assets. One pro tip to consider is a QCD, or Qualified Charitable Distribution, if you have an IRA and give consistently to charity.

Income Planning – One of the biggest fears of retirees – and rightfully so – is outliving their money. When building your plan, it is a good idea to inventory all of your income now. That way when you retire, or if you pass on, you or your spouse can see your income at various stages. One pro tip is to secure your income via inexpensive term insurance. While this type of policy may retain no long-term value, it is essential that you protect your spouse and family above all else.

Long Term Care – Long term care expenses can blindside families in the last chapter of their life. When building your financial plan, consider the cost of care in your area by researching the Genworth Cost of Care Survey website. It details the local cost of Assisted Living and Nursing Home facilities, as well as  Home Health Care. One pro tip: If you or a loved one is a veteran or a widow of a veteran, consider researching eligibility for the Veteran Aid & Attendance program, which pays up to $2,230 a month for long term care expenses.

Asset Allocation – Asset allocation is not a melting pot of stocks and bonds put in a pie chart format. When building your financial plan, be sure to separate money by objective – giving your money certain jobs to fulfill. Assets should be set aside for emergencies, long-term growth and as a hedge against potential market loss. One pro tip is to consider the rule of thumb called the Age 100 Rule. It is not a perfect rule, but it’s a good place to start: Subtract your age from 100; that number is a rough measure of what percentage of your portfolio should be in equities; the subsequent balance should be in vehicles that are more conservative.

As you can see from the above, there is a lot that goes into your financial plan. If you have questions about your plan and want a second opinion, we can help. We’re happy to offer families a second opinion on their DIY financial plan.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM) and/or Swan Capital. AEWM and Swan Capital are not affiliated companies. 00636350

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