Financial Planning For Busy People

Posted on September 10, 2013 at 10:53 PM PST by

Financial planning is one of those snoozer topics that tends to end conversations quickly. People know they need it and they know it matters, but the actual work is deadly dull for most.

Cheer up. I’m not about to tell you to start cracking on a budget or to go balance your checkbook. Both are good exercises in discovery regarding where money goes in your daily life, but it’s not the same as financial planning.

financial planning

Planning is projecting, thinking through “what if” scenarios and trying to figure out how you would handle extremes.

What if… the breadwinner in your family fell ill or died? How would the survivors pay the mortgage? Food? Education?

What if… an unexpected health crisis cost you your entire short-term savings and put you deeply in debt?

What if… you live 10 or 15 years longer than your longest-lived relative?

These are real situations people face and, frankly, fairly common. Being under-insured can be a serious burden on your loved ones, if you are the only earner in the family. A common reason for personal bankruptcy is healthcare costs.

And, yes, you might outlive your savings. Here’s how the Social Security Administration puts it: “A man reaching age 65 today can expect to live, on average, until age 84. A woman turning age 65 today can expect to live, on average, until age 86. And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.”

So, you have a 25% chance upon traditional retirement age of living past 90. Feeling lucky? Is your retirement account ready to finance 25 years more of living, spending and inflation? It’s a sobering thought.

Financial planning action steps

The point is not to worry you. I am sure you have worries enough. But I do mean to light a fire under you to take financial planning more seriously.

Here are some short-term things to do, and one long-term move:

1. Save more, now. Up your savings level in your 401k at work. Chances are you take out only the minimum. Stretch to double-digits if you can. If you can’t, make a plan to increase savings slowly over a few months or a year. But get there.

2. Defer taxes. Your 401k or IRA should help you avoid taxes today and help you save more. But a Roth IRA can help you avoid taxes in the future. Consider owning all three.

3. Lower investing fees. High fees for financial advice and for mutual funds represent a gaping hole in the life-raft that is your retirement savings. Keep costs low and you’ll have more later.

Finally, understand that making even small steps now will make a difference. Making choices will give you the courage to expand your planning and get on the right track. All you have to do is start.




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