If you’ve never made one before, creating a financial plan can seem overwhelming. Get started with these financial planning basics.
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A budget is the building block for everything else. By keeping track of what you earn and what you spend your money on, you get a complete picture of your financial situation and can easily identify areas for improvement. If you’re not sure where to start, try a tool like this one, or if you’re more tech-savvy and like Excel, this may work better for you. For more tips on creating a budget, check out this previous post.
2. Emergency Fund
Life is unpredictable. Having an emergency fund helps protect you from life’s uncertainties. Typically, financial advisors suggest having $1,000 readily accessible and at least three to six months’ worth of funds available for emergencies. No matter what your financial situation, you can build an emergency fund.
3. Retirement Money
If you work for a company that offers a 401(k) or other retirement planning, take advantage of it. At a minimum, try to maximize any employer matching they offer.
If you don’t have a company-sponsored retirement plan, speak with a financial advisor about other retirement planning options such as an IRA. We offer more suggestions to help you save for retirement, too.
Insurance helps defray costs when unexpected things happen. Depending on your lifestyle, you’ll want to consider the following types of insurance: health, auto, home or renters, life insurance, and long-term care insurance.
5. Will and Other Legal Directives
Your will provides plans for your estate after your passing. It may also include Trusts or other financial programs. In the process of creating your will, you may also want to set up a health-care directive and financial power-of-attorney, so it’s clear who can make decisions on your behalf if you’re not able to do so.
How many of these financial planning basics do you have covered?