How to Create Your Yearly Personal Financial Plan

As the year comes to a close, it’s easy to get caught up in the hustle and bustle of the holidays. But if you really want to set yourself up for the future, take some time to review your financial planning checklist. By mapping out your personal financial plan–regardless of what month or even year it is–you’ll have a better chance of reaching both your short- and long-term financial goals.

What is a financial plan?

A financial plan is a map of where all your money goes. It takes into account how much money you’re making and spending, where you need to make adjustments, and financial goals for the future. Some factors to consider include the following.

Your assets:

• Income (like your paycheck)

• Savings and checking accounts

• Retirement funds

Your liabilities:

• Mortgage payment or rent

• Car loans

• Student loans

• Credit cards

• Utility bills

• Cellphone and internet bills

• Other monthly expenses

Your goals, such as:

• Paying off debt

• Buying a home

• Building up emergency savings

• Increasing your retirement fund

• Starting or increasing contributions to a college fund

• Developing or fine-tuning an investment strategy

Everyone’s financial goals are different, but the important thing is to have some idea of how you want your money to work for you.

Cash flow planning

If you lost your job today, how much money would you have to survive that emergency? Almost 80 percent of Americans are living paycheck-to-paycheck, which means if you don’t get your next one, you could be great financial distress. Even worse, 44 percent of us can’t cover a $400 emergency expense, even if we’re currently working.

An emergency fund is a crucial part of any personal financial plan. Start yours by reviewing your assets: how much money you have coming in through things like your paycheck, savings and checking accounts, and even some investment accounts, like your IRA or another retirement fund. Will those accounts cover your costs for three to six months? If not, consider boosting your emergency savings.

Investment planning

While investing was once seen as something only the wealthy could do, there’s no shortage of opportunities for you to invest with very little money. Many robo-advisors will let you open an account with little to no money, and some investment apps can take every transaction you make and round it up to the rest to the nearest dollar, depositing that extra change into your investment account.

If you’re already investing, now is a good time to check up on your portfolio with questions like:

• What fees am I paying?

• Do I need to be more conservative or aggressive?

• How much is my financial planner making off my account?

• Do I need to hire a financial planner?

• Am I contributing enough to my investments?

• Is my portfolio diversified enough?

• Are there any investments that are costing me more than they’re earning?

Not everyone’s investment plans are on the same track, but you should check in with yours to see how it’s doing and whether you need to make adjustments.

Insurance planning

Health insurance

Whether you have health insurance through your employer or the marketplace, open enrollment is a good chance to check up on your coverage. How often do you visit the doctor, and what are your current costs? Can you pick a plan with a higher deductible so your monthly costs are lower? Or do you need a plan with a lower deductible so your copays aren’t emptying your pockets?

You could also explore dental and vision plans if you don’t already have them. Ask your current doctors about your regular costs to see if having insurance coverage is worth it. Some dental and vision providers may give you a discount for paying out of pocket rather than through insurance.

Car insurance

Evaluate your car insurance as well. Compare quotes from other insurance companies for the same coverage and talk to your current insurer to see if there are any deals available. If you can’t get the best rate from them, it might be time to move on.

Homeowner’s insurance

Do you need to make adjustments to your homeowner’s insurance? If you still have private mortgage insurance, do you know how much more you’ll need to pay to get it removed so your monthly payments are lower? Do you qualify for any bundles with your homeowner’s insurance and other types of insurance? Talk to your lender to see what deals you can strike to save some cash.

Life insurance

Lastly, explore or review life insurance plans. See if your employer offers one and what’s covered. Is it term life insurance or whole life insurance? What are the pros and cons for your family for choosing one over the other? If necessary, you can talk to a licensed life insurance agent to find what works best for your family.

Tax planning

No one looks forward to a hefty tax bill. If you’re trying to find ways to lower what you owe or increase your return, there are a few things you need to do.

• Increase donations: The end-of-year giving is upon us and the more you donate, the lower your tax bill could go.

• Max out retirement contributions: Make sure you’ve given all you can to your employer-sponsored 401(k) or IRA.

• Contribute to your HSA: If you have a health savings account, contributions are tax-free, so give yours a boost.

See which credits and deductions you qualify for now before you file taxes next year. This gives you a chance to see where you can catch a break and can save you time on Tax Day.

Retirement planning

Nearly 48 percent of Americans 55 and older don’t have anything saved for retirement. Whether it’s from poor planning, not earning enough to contribute, or another reason, failing to save is risky. Even if you don’t plan on retiring, health issues or other concerns could force you out of work.

Carefully review your employer-sponsored 401(k) plan to make sure it’s doing enough for you. See if your employer is matching every dollar they can to your plan. Look over the fees and ask your plan manager if you’re unsure about anything.

Contribute as much as possible. For 2019, you can contribute up to $19,000 to your 401(k). If you have an IRA, it’s $6,000. And if you’re 50 years of age or older, you can add an extra $1,000 to your IRA without facing a penalty.

Estate planning

Thinking about death isn’t fun for anyone. But it’s a necessary step if you want a say in what happens to your assets after you pass. Make sure you have a will and an executor, and see if you need a trust as well. If you already have an estate plan, review it to see if anything needs adjusting. Are your children older? They might not need a guardian after you pass. Do you have grandchildren? Review what you’re passing along to them.

It’s also a good idea to have an end-of-life plan that spells out your wishes about being on life support or whether you’d like to be cremated or buried. Do you have money set aside for your funeral or a prepaid burial plot? It may be uncomfortable to consider these and other aspects of your personal financial plan, but doing so can provide piece of mind and clear path forward.

Check in on all your finances

For all the stress money can cause in your life, having a financial plan can help lessen it. And the good news is learning how to deal with debt, money, and planning for your future doesn’t need to be hard. At Freedom Debt Relief, we’ve developed a simple to follow guide to help you find the tools you need to move to a better financial future. Get started by downloading our free guide right now.

Learn More

• A Coronavirus Financial Plan: 5 Steps (Freedom Debt Relief)

• 8 Financial Goals for 2019 (Freedom Debt Relief)

• 15 Financial Planning Tips for Beginners (Forbes)