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Financial Planning Checklist

With the uncertainty in the current economy, more individuals are focusing on financial planning. However, managing your finances can be difficult and overwhelming when you first begin. Creating a good financial plan allows you to set both short-term and long-term goals for your financial future. To learn more about financial planning and how to create a plan for yourself, consult the following tips. Each section also contains links to additional resources.

Create a Short-Term Financial Reserve

One of the most important things you can do to plan for your financial future is to stockpile between 3 and 6 months’ worth of living expenses as a reserve to use in case of emergency. Having such a reserve relieves financial anxiety because you know that you can survive for a while if you lose your job or experience medical problems. You can create this stockpile by slowly depositing money into a savings account each time you receive a paycheck. Eventually, the funds will be sufficient to sustain you in the event of an emergency.

Saving Money: This page explains methods you can use to save money.

Savings Accounts: This page provides information about savings accounts.

Eliminate High Interest Credit Card Debt

Many credit cards carry extremely high interest rates. You can cut down on your monthly expenses significantly if you pay down the balance on these cards. If you can’t afford to pay all of a card’s balance at one time, you can eliminate the balance by making more than your minimum payment for several months. If you can’t pay the cards off, you can try to transfer the balances to a card with a lower interest rate.

Managing Credit Cards: This page answers frequently asked questions about credit cards.

People Make Mistakes When Paying Credit Cards: This article addresses common myths about paying off credit cards.

Create a Household Budget

Another important step in financial planning is to create a budget for your household. To accomplish this, you must first determine how much you have to spend each month. You must then identify which of your expenses are essential and which are not essential. Finally, evaluate each expense and look for ways to reduce it.

Creating a Budget: This article explains strategies you can use to create a budget.

Budget Worksheet: This page offers a worksheet you can use in developing your budget.

Why Create a Budget?: This page explains why budgets are beneficial in financial planning.

Save Money for Retirement

To save for retirement, start by looking at the retirement plan your employer provides. Review the details to make sure that you are taking advantage of the best options available. If your employer’s plan is not sufficient, consider contributing to a Roth IRA or a traditional IRA. These plans are tax-deferred, which allows your funds to grow more quickly.

Top 10 Ways to Prepare for Retirement: This article describes steps you can take to prepare for retirement.

IRA FAQ: This page explains traditional IRAs and Roth IRAs.

Be Sensitive to Taxes

If you are paying more taxes than you need to, your finances can suffer. Make sure that you take all of your applicable deductions. Most people can deduct mortgage interest, local and state taxes, medical expenses, and charitable contributions. If you have capital gains on your investments, be sure to consider their preferential tax treatment.

What are Tax Deductions?: This article explains tax deductions and how to know if you qualify for them.

10 Common Tax Deductions: This article lists 10 common tax deductions.

Form an Investment Strategy

If you invest in securities, categorize them as cash investment, equity, or fixed income investments. Allocate your assets to your investments based on your age and the level of risk with which you are comfortable. If you are young and feel comfortable with risks, invest more of your funds in equities to gain a high return. Keep in mind that every investment involves a risk, and there are no guarantees of future income.

Fundamental Strategy for Investing: This page explains some basic investment strategies.

Investing Tips: This page offers some basic investment information and tips.

Purchase Adequate Insurance

An unexpected event can cause detrimental damage to your health, life, and possessions. Make sure that you have purchased insurance policies to protect these assets. Before choosing an insurance policy, examine the options available. Choose the policy that provides the most protection for the lowest cost.

What is Insurance?: This is a basic definition of insurance.

Life Insurance 101: This page explains life insurance and how it works.

Develop an Estate Plan

Creating a plan for your estate can reduce taxes and ensure that your assets are distributed according to your wishes. An estate plan should also designate an individual to make financial decisions if you become unable to make them for yourself. It should also include a plan that allows an individual to make medical decisions for you if you become incapacitated.

Do I Need Estate Planning?: This page provides extensive information about estate planning.

Estate Planning: This page offers basic information about estate planning and links to information about the specific documents involved.

Organize Your Records

Organization is a key aspect of financial planning. If you create a system to handle your monthly expenses, you will experience less stress. You will also spend less time handling your finances on a daily basis. Make sure that your system includes a method for keeping track of your investments, which will make tax season easier. In addition, you can use this system to keep important information organized, such as account numbers and insurance agents.

Financial Records — Getting organized: This article offers advice for organizing your financial records.

You Can Organize and Simplify Your Financial Life (PDF): This document explains ways to organize your finances and improve them.

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