Your financial life is an ever-evolving journey. As your life changes, it’s crucial to adjust your financial plan accordingly. I’ve created this comprehensive 10-point financial planning checklist to help you keep your finances on track.
Introduction
A sound financial plan is the foundation of your financial health and success. It helps you effectively manage your money, reach your goals, and prepare for the unexpected. However, creating a financial plan is just the first step. To get the most out of it, you need to revisit and update your plan regularly as your life and circumstances change.
What is a financial plan?
A financial plan maps out your current financial situation and helps you take control of your money. It typically covers areas like budgeting, debt management, saving and investing, insurance, retirement planning, and estate planning. The plan sets targets and outlines actionable steps to achieve your short and long-term financial goals.
Why is a financial planning checklist important?
Life is full of changes – a new job, marriage, birth of a child, relocation, or starting a business. Each change can significantly impact your finances. A checklist ensures you review key aspects of your financial life when a major event occurs. It prompts you to update your plan to align with your evolving priorities and needs.
10-point financial planning checklist
This 10-point financial planning checklist covers critical areas to help future-proof your finances. Let’s get started!
1. Life Changes
Major life events often require reworking your financial plan. Update your plan when you expect or experience significant personal or family changes.
- Job change: Review your budget, emergency fund, insurance, and retirement savings. Adjust your savings and investment strategies. Take advantage of any new workplace benefits.
- Marriage: Discuss financial goals and combine finances. Update beneficiaries on accounts. Review insurance needs. Plan for any new expenses.
- New family member: Account for increased costs. Get life insurance to protect dependents. Save for college, if needed. Update estate plan.
- Move or relocation: Recalculate housing and moving costs. Adjust emergency fund. Review insurance policies, investment properties, and estate plan.
- Other big changes: Review entire financial plan and realign it with your new priorities and responsibilities.
2. Overall Financial Plan
Comprehensively review your financial plan every six months. Even without life changes, your income, expenses, and goals may shift over time.
- Update your budget: Alter it if income or expenses change. Align it with your values.
- Review compensation: Account for bonuses, stock options, commissions, or restricted shares.
- Check retirement savings: Max out contributions. Use catch-up contributions if age 50+.
- Verify emergency fund: Save 3-6 months’ expenses. Keep it easily accessible.
3. Emergency Fund
An emergency fund covers unexpected expenses without needing debt. It provides financial security when you lose your job, have a medical emergency, or if disasters strike.
- Have at least 3-6 months’ worth of living expenses. Increase the amount if you are the sole breadwinner or have a risky job.
- Keep it liquid: Save in an accessible high-yield savings account, CDs, money market fund, or short-term bonds.
- Automate deposits: Set up automatic monthly transfers into your emergency account.
- Replenish after use: Build it back up after withdrawing for an emergency.
4. Insurance Policies
Insurance provides protection against financial loss. Review policies annually to ensure adequate coverage as your life situation evolves.
- Homeowners/renters: Insure home and belongings for full replacement cost. Review after major purchases or move.
- Auto: Increase liability limits and collision/comprehensive deductibles as assets grow. Add teen drivers.
- Life: Purchase 10-15x annual income in coverage. Update beneficiaries.
- Disability: Get coverage replacing 60-80% of income. Review at job changes.
- Health: Choose plan with affordable premiums and deductibles per medical needs.
- Long-term care: Consider if extended healthcare support is needed.
5. Loans and Credit
Debt drains your money long-term. Have a payoff plan for all loans with the highest interest rates first.
- Pay down high-rate debt: Consolidate or refinance loans/cards over 10% interest.
- Pay on time: Set up autopay. Check credit report for errors.
- Use wisely: Limit credit cards to what you can pay monthly.
- Save while paying off: Contribute at least the company match to retirement accounts.
6. Gifting to Heirs and Charities
Gifting during your lifetime can reduce taxes on your estate. It also helps instill financial values in your children.
- Set annual exclusion gifts: Give $16,000 tax-free per recipient in 2023.
- Donate appreciated assets: Give stocks or property to bypass capital gains tax.
- Use donor-advised fund: Get an immediate tax break while designating charities over time.
- Review estate plan: Update after significant gifting to heirs or charities.
7. Estate Planning Documents
Estate planning ensures your assets transfer according to your wishes when you pass away. Documents to have:
- Will: Outlines asset distribution and names guardians for minor children.
- Living will: Provides healthcare wishes if you can’t convey them.
- Healthcare power of attorney: Names someone to make medical decisions if you’re incapacitated.
- Durable power of attorney: Names someone to handle finances if you’re incapacitated.
- Review often: Update documents for major life events like marriage or divorce.
8. Tax and Market Changes
Stay up-to-date on tax and market changes that could impact your finances or retirement planning.
- Tax law changes: Watch for changes to deductions, tax brackets, estate taxes, etc.
- Market volatility: Have proper asset allocation and rebalance portfolio regularly.
- Required minimum distributions (RMDs): Take RMDs from retirement accounts after age 72 to avoid penalties.
- Social Security strategies: Understand file and suspend and spousal benefit options.
9. Retirement Milestones
Certain ages come with changes to Social Security, Medicare, and retirement accounts. Plan accordingly.
- Age 50: Catch-up contributions allowed for 401(k)s, IRAs, HSAs.
- Age 55: Penalty-free 401(k) withdrawals if retired.
- Age 59 1⁄2: Penalty-free IRA withdrawals.
- Age 62: Social Security eligibility.
- Age 65: Medicare eligibility.
- Age 70 1⁄2: Required minimum distributions from retirement accounts.
10. Retirement Income Plan
A retirement income plan helps your savings last by matching expenses with regular income sources.
- Review spending needs: Understand essential vs discretionary expenses.
- Identify income sources: Estimate Social Security, pensions, annuities, part-time work, etc.
- Calculate required withdrawals: Take RMDs from retirement accounts.
- Understand risks: Address longevity, healthcare costs, inflation, sequence of returns.
- Include healthcare: Enroll in Medicare and supplement needs.
- Review annually: Confirm accounts aligned with your needs.
Download the Financial Planning Checklist
Interested in downloading a checklist? Here is the download link for the one by Merrill Lynch
Conclusion: Keep Financial Planning On Track
There you have it – a thorough financial planning checklist to keep your money management on point as life changes. Refer back to this guide during major events or at least twice a year. Stay proactive with reviewing your plan. Connect with a financial advisor for guidance optimizing your personal finances through different stages of life. With continuous maintenance, your financial plan will support you on your journey towards your dreams and a secure future!
Managing your money successfully is a marathon, not a sprint. It takes continuous effort to keep your financial plan updated and optimized as life unfolds. But staying on top of it pays huge dividends in peace of mind now and financial stability down the road.
What resonated most from this financial planning checklist? Look back over the 10 key areas. Which could use some TLC for your situation right now? Did any prompt new ideas or changes to implement in your own plan?
The more purposeful and proactive you can be in shaping your finances, the greater your chances of financial freedom. Consider connecting with a financial advisor if you need an expert second set of eyes. Together you can assess gaps and opportunities to improve your plan.
Financial planning is always evolving, but you’ve got this! What small step can you take today to move your money plan closer to your dreams?
