Simple beginners strategy for future financial planning
By Monica K. Guthrie
My husband and I decided to take a day to focus on our finances. We called our banking institution and talked with a financial advisor to get our pennies in order. I thought it would be generous to share what I learned with you all and to start a conversation about what things you do to prepare (financially) for the future.
Brian Steffen, our advisor, made a comparison to a home. He said that we ought to think about our finances the way one thinks about building a house: you can’t build a strong house without a strong foundation. The three areas to focus on were:
- Having an emergency fund
- Getting out of debt
- Establishing life insurance
Steffen recommends beginning your financial plan by breaking down your income and expenses. You may have to print off a few months of bank statements to get an honest account of your spending habits. Once you see everything on paper, you’ll be able to see just how much you spend on things like bills, groceries and frivolous items. For me, this required me to take another look at what I spend on food – both groceries and eating out. I realized that my quick stops for snacks for the kids, or my exhaustion and subsequent pizza buying for dinner was more than nickel-and-diming our finances. I had to really get focused and that meant making a meal plan and then sticking to it.
There are many programs and apps that can help you with budgeting. There are envelope systems, cash systems, or pen-and-paper tracking systems. Find what works for you and stick to it. Once you know how you’re spending, you can start to rededicate your funds to places they need to be – like your emergency fund.
Your first step is saving a thousand dollars for an emergency fund. The emergency fund is not for emergency pizzas or haircuts. They are for actual emergencies such as when your car needs repairs or your house starts to leak. Start with saving a thousand dollars and once you’ve done it, turn your attention to step two. It may take a few months to save up, but don’t skimp. Stick to the plan you made when you got started.
Getting out of debt
Many of you may be familiar with Dave Ramsey, creator of Financial Peace University and frequent radio and television financial personality. Ramsey uses a term “snowball affect” to describe how to tackle debt. He (and many other financial advisors) recommend tackling the smallest debt first and getting it out of the way. Then use that motivation to propel you to tackle the next smallest debt. Continue that pattern until you are completely out of debt.
Establishing life insurance
If there’s anything for sure in life, it’s that life will come to an end for everyone. Be prepared for yourself and for your family by establishing life insurance. It’s not something we want to think about but it’s important to have. It’s not a way to make money – this is about looking after your loved ones (spouse, children, family members). This can help pay for expenses (the costs for funerals, burials, cremation – it can be costly), cover debts, and can help provide an inheritance. There are many options out there on types of life insurance, talk with your financial provider about what they can offer, and then look at other business as well to get the best solution for you and your family.
Once you have those steps mastered you’ll have given yourself a strong foundation to build the rest of your home – to include increasing your emergency fund to at least one month of income and then increasing it again to three months of income. You can also go on to start planning for retirement and your children’s college education. If you need to, call back to your financial institution and talk with a financial advisor again to make additional plans.
As a side note, my family JUST eliminated our debt last week – it was super exciting! It took a lot of planning and we had a few setbacks (where we got out of debt only to get back in it again). The important part is that we didn’t give up, even when we got back in debt. We did our best to stick to the plan, even when we had an unexpected washing machine die … and a car that needed repairs … and then another car that needed repairs. Instead of giving up, we dug our heels in and worked harder. My husband started to give plasma and I started selling things in our home that we didn’t need – and probably the most important thing we did was to learn to say “no.”
We learned to say “no, we can’t go out to dinner with you guys, but maybe we can get together for a game night?” or “no sorry, we can’t go see the movie, but maybe we can do a Star Wars marathon at our place next week?” Saying no to fun activities with our friends and family was difficult but we explained our goals and they were supportive. Now here we are, debt free and ready to push on to the next stage of our financial planning. You can do it too! Good luck!
What tips or planning strategies were game changers for you? Share with other readers by commenting below or on our Facebook page.
Monica K. Guthrie is an Army brat, an Army veteran (Rock of the Marne!) and now an Army spouse with two boys. She is currently the media relations officer for the public affairs office at Fort Sill, Okla., and writes a weekly column called the Okie Bucket List. She also has a photography and graphic design business, Pro Deo Creations, that she maintains between potty training and kissing scraped knees.
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