A 20 Year Financial Plan – The sooner you start, the better



A 20 Year Financial Plan – start now, have no regrets

by Lisa Feeley, Author of SpendRight

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As a financial life strategy coach, I talk with people of all ages and many seem to have the same questions: How do you create a good financial plan and when is a good age to do start? To which I almost always answer: starting a financial plan is easy, but what you want to make of it depends on how disciplined you are what your goals are and with regards to when to start, the younger you are, the better off you are in starting your plan! Here is my recommendation on how to develop and maintain a 20 year financial plan.

1) Start by writing down your current financial state. What are you earning and what do you owe? What are your assets. Make it easy. It is a basic checkup. REPEAT at the end of each year.

2) Write down your 1 year, 5 year, 10 year and 20 year goals. Do you have health care bills to pay off? Do you want to buy a car that will cost you $10,000.00 in 2 years? Do you want to travel to Italy for 3 weeks? Do you need to save $10,000.00 for a house down payment? Retirement savings of $1M or college savings of $50,000. Whatever your goals, write them down in detail of how you are going to pay for them and when you will achieve them? For example: If you earn $2,000.00 a month and can put $200.00 a month aside for that $1,600.00 vacation you want, you can achieve your goal in 8 months. REVISE every 3 years.

3) As soon as you can, start a ROTH IRA. So, whether you are 15 and just earning some summer money or 40 and already have some investing experience, a ROTH Individual Retirement Account is a great place to start. Review every 2 years to make sure you are securing at least a 7% return on your money. If not, complete a direct transfer to another fund.

4) Think Retirement first, then other goals. As soon as you are eligible, contribute enough to a 401k at work (or whatever the employer plan) to get the employer’s match. This is free money people. Never turn down free money. Since it is pre-tax, you get even more money than just the employer’s match too. Ongoing but diversify your choices.

5) Start a bond savings program. Buy a $100.00 bond a month. I favor Series I bonds personally. Go to any bank and ask how to do this. Do this for 5 years.

6) Look at your life insurance and make sure you have enough. If you are young, seriously consider whole life insurance plus some term. If you are in your 50’s, whole life is often too expensive – but its up to you.

7) Vow to read 2 good finance books per year. There are hundreds out there and they target every age and every desire from learning about investing to retiring before 50. Learn, learn, learn.

8) Know thy tax code. Read J.K. Lasser or similar tax guide. Over the years, you will most likely save lots of money that you really never owed to Uncle Sam. Read one good tax book per year.

9) Consider individual stocks. Especially if you are in your 20’s or 30’s, the only thing to fear is fear itself. There are some great opportunities with some blue chips you are seriously missing out on by just investing in mutual funds. Accumulate 25 to 50 shares of 10 different stocks over a 5 year period and then, hang on. Stocks are a long term investment.

10) Subscribe to going to the library once a month and reading Wall Street, Kiplingers, Smart Money, Money, or other financial magazines and journals that will give you some great insight into what today’s financial gurus are doing. 1 hour of your time, once a month.

11) Draft a will. There is no wrong time to do this. Ok, maybe if you are 15 you don’t need one, but there is no good excuse from anyone over 25. Ask your attorney how often you need to revise. We revise ours every 5 years unless a major event in your life occurs.

12) Learn about credit. Secure credit wisely. Manage your credit monthly. My recommendation: No more than 3 credit cards.

13) Request your free credit report and buy your credit score on at least a bi-annual basis.

14) Buy only slightly used cars, drive them for at least 5 years and sell them before any big expenses occur. Keep good records (like oil changes, tire purchases, etc.) because cars in good condition with good maintenance records will give you a better return on your investment.

15) Understand some long term fixed investments such as Treasuries or fixed annuities. They are worth learning about if you are young. The cost of health care insurance 15 years from now is a big unknown and if you are not retiring from a company that is offering you a great retiree health insurance package, buying a fixed annuity or some bonds to cover such costs may be worth investing in now. Ask your Insurance advisor.

16) Look for investments that provide dividends. Reinvest your dividends. Think long term.

17) Invest in yourself in order to earn as much as you can. Think certifications, think education. Make sure what you are learning can be sold in terms of increases in your wages.

18) Teach your children (as soon as they start school) about money and how to invest (even 3rd graders can grasp the idea of owning a piece of Disney, Tootsie Roll or Wrigley).

19) Make sure you have an emergency fund in short term bonds, CDs, money market funds, or cold cash. My recommendation: 6 months worth of living expenses.

20) Revisit your 20 year plan in detail yearly. Cross off accomplishments. Update your goals.

Well, that’s all. Wasn’t that easy? It is not difficult if you take a few steps each month. If you have any specific questions, feel free to drop me an e-mail at . Remember, the goal is not to outlive your money so be not only physically fit but Fiscally Fit too!

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