When you are fresh out of the military or going to school with the GI Bill or busy managing life and family as a veteran, it can be hard to think long term. For many veterans and military personnel, financial planning is not something they have spent a lot of time thinking about.
However, creating a comprehensive financial plan can help you avoid the stress and anxieties caused by unexpected financial pressures or lack of preparation. Life is full of change, but you can enjoy the ride when you are prepared.
A financial planner can assist you with preparing a comprehensive financial plan. It helps to think about a few things before you go in to meet with your planner. You should also discuss this with your planner and provide any notes you have.
First of all, what are your goals? It may seem simple but you need to know where you want to go before you can have a map to get there. Start with your immediate goals whether it is paying off debt and then go on to bigger goals such as your child’s education and your retirement savings. Take notes and write them down.
Next, take a look at your expenses. If you are using a financial planning software tool such as eMoney [ADD LINK] or mint.com, you can quickly track your expenses and even forecast your expenses monthly and annually. By calculating your income and tracking your spending you will know where your money is going and what your financial situation looks like. Then create a budget to ensure that you spend less than you have.
Look at your available cash. Do you have cash on hand for emergencies? Aim for an immediate $1,000 of cash put away for immediate use. Then increase it to $5,000. Work to put aside three to six months of living expenses.
Next look at your debt. Add up all your debt from credit cars to mortgage payments, car loans and student loans. Come up with a plan to reduce that debt, starting with the debt that has the highest interest rate first. As you pay off your debt, you will feel so empowered and increasingly confident in your own abilities.
Next think about your long-term plan for retirement and other expenses such as buying a house, education, travel and other goals you may have. If you have a limited budget, put aside just 2% of your paycheck in your company 401(k) or an individual retirement account. Aim over time to put aside 10% of your income aside in savings.
Choosing mutual funds can be intimidating when you have not done it before. A financial planner can be very helpful in this stage of your financial planning to help you determine where to invest your hard-earned money. As you grow your investments, you will also want to increase your knowledge about investing strategies and get professional help.
Finally, plan for other emergencies such as property damage with sufficient property insurance and life insurance for family members. You will also want to create a will to help you allocate your property, assets and belongings to loved ones in the event of your death.
Working with a Financial Planner or Advisor
When you create a comprehensive financial plan with financial professionals, you can develop a clear picture of your current financial situation by reviewing your income, assets and liabilities. You will evaluate your insurance coverage, your investment portfolio, your tax exposure and your estate plan. You can establish and prioritize financial goals and time-frames for achieving your goals.
You will want to implement strategies to overcome your financial weaknesses and build upon your financial strengths. Adjust your plan as you need to. You should review your financial plan once a year to make sure it is up to date and to make any necessary changes.