Financial Planning

Creating a financial plan is crucial for achieving financial wellness. You might think that you have plenty of time to get your ducks in a row, but why wait? With time on your side, financial planning can be stress free. The longer you wait the heavier this will weigh on your shoulders and the more compound interest you will be losing out on. Although it might seem overwhelming, it can be simplified into easy steps that won’t consume your life.

Setting Goals

You need a path. Just like when you are going on a trip, you need your road map. This is essential, as it will guide you through every decision. If the action or step does not lead you toward your goal, then it’s not worth following.

When setting goals, it’s important to determine when the funds will be needed, as this will help you determine your horizontal timeline, short, mid, or long-term goals. This is essential to differentiate, as it will determine the type of account you want to use to hold your money. Further classification into “want” or “need” will help determine which fund to fund if money becomes tight or you lose your job.




Why is retirement first? Time and employer match is something to think about. It’s imperative to take advantage of an employer’s 401k match – it’s extra money that would otherwise be wasted. Additionally, the earlier you start, the less you have to put out of pocket, as compound interest is in your favor. At this stage you can begin with matching your employer, later on you can maximize your retirement.


If you don’t have an employer match, you can contribute to an IRA, Roth or traditional, depending on your situation. Something to consider is that you can’t retire on loans, so start with small contributions, as they can grow significantly.

Emergency Fund

Emergency funds prevent you from using credit cards in an emergency, lessening the chance to increase your debt. This account should be in a separate account than your regular checking account, yet easily accessible and liquid. An important reminder is if you use your emergency fund, then you stop whatever step you are on and replenish it. The following is a guideline of how much to put in an emergency fund:

  • $700  – when we’re young and don’t own a car
  • $1,000 – own a car
  • $3,000 – own a car and house

Pay off all Debt

Thinking about your debt may be daunting and sometimes too much to bear. However, it’s important to know how much debt you have. This will give you peace of mind, as you will be able to set up a timeline and a payoff strategy. The key is to begin now, stop using credit cards, and use any of the following strategies:

Snowball Effect – Motivation

The focus of this method is to target small debt first.

  • Pay off the loan with the smallest balance first 
  • When it’s paid off, compile that payment with the next smallest debt payment
  • Ultimately snowballing all the payments one after the other until debt is satisfied

Avalanche Effect – Saving Money

This is the same as the snowball effect except the focus is on highest interest bearing debt.

  • Pay off the loan with the highest interest first 
  • When it’s paid off, redirect payment to next highest interest bearing account

Island Approach – Saving Money

  • This method uses credit cards with a purpose. Set one credit card for your everyday expenses and pay off the balance in full every month to avoid paying interest
  • Obtain a second credit card to transfer your high interest credit cards. This card will carry a balance, so it’s essential to use a low bearing interest account or 0% interest account
  •  If you use 0%, you must be certain you won’t go over the allotted time as the interest rate can be high

6 Months Savings of Living Expenses

Once debt is paid off, the focus is on savings. This will protect you against: 

  • job loss 
  • injury
  • familial obligations 

You can use an interest bearing account for these funds such as mutual funds or EFT’s. An added coverage can be having disability income insurance.

Saving for Retirement 

Once you have completed your 6 month saving account, it’s time to maximize your retirement. Work is a great place to start if a plan is offered. If not, you have the option to save by using an IRA through robo investing online. This can be done by answering a couple of questions on the investing website. If managing your account makes you nervous, you can hire a financial advisor to assist you in navigating your portfolio. With managed portfolios, the fees can be costly, so it’s important to ask about them up front.

Different types of retirement accounts:

401(k) – Investments limited to funds provided by employer

IRA’s – Owner is in charge of investments

  • Traditional – contributions are made pre-tax which will reduce taxable income, but early withdrawals are taxable and subject to 10% penalty
  • Roth – funded after-tax, but withdrawals from contributions are tax-free certain restrictions apply

Saving for College

Once you have maximized your retirement, you can direct funds towards college. 

529 College Savings Plan

  • Funds grow tax free until used for approved college expenses
  • Funds not used for college will be taxable


  • Beneficiaries must be 18 or younger when fund is established
  • Total maximum contribution per beneficiary is $2,000 per year
  • Funds can be used to pay for any educational expenses including K-12
  • Funds must be used by the time the student is 30 or withdrawals will be taxed and penalized

Roth IRA

  • Rules are the same, but can be used for qualified educational expenses

Pay off the House

Paying off the house early affords you the ability to add more to your retirement or other investing, plus the added advantage of retiring without a mortgage payment.

Per The Mortgage Reports, here are 5 ways to do so:

  • You can refinance to a shorter term
  • Make an extra payment
  • Make one extra payment per year
  • Recast – make a lump sum payment towards your principal but keep the same mortgage
  • Make a lump sum payment towards the principal

Final Thought

Financial Planning is something that needs to be reviewed and adjusted as you transition through every life change. Rebalancing your portfolio as needed when life throws a curb ball is essential. Additional reinforcement can be made through life insurance, understanding the tax credits, and getting your will or estate planning in order. The key is to start now, even if you start with $10 a month. This will help you strengthen the habit of saving.

Mindful Reminder

If you find yourself procrastinating, ask yourself why? Review your responses and see if your answers outweigh being proactive in your financial affairs. Fear is detrimental, as it causes us to think of unrealistic scenarios for a future that’s not even here. Pause and allow time for silence to create space between the fear and the situation. It may be that you need to set aside some time to review your situation, or you may need help. Use a method to center yourself if you become flustered. Then, try again when you are calm. 

Attend a Workshop

If you are interested in attending a live webinar on financial planning, please visit my events.

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