I love DIY projects.
This past weekend I was going to fix my garage door. I researched the issue, watched a few YouTube videos and talked to some professionals. I felt confident I could fix it, so I ordered the supplies.
The project was going well until I started to add the new part. It wasn’t working. I reviewed the instructions, but no luck. Frustrated, I gave up after an hour and went back to the drawing board. After my review, I figured out that the part I had ordered was 1/16th of an inch too big, so I ordered another replacement part. When it arrived, I completed the project in less than ten minutes. A friend of mine once told me with the right tools you can fix anything. He was right.
The primary tool for an investor is the financial plan. It will give you a blueprint on how best to construct, or fix, your financial life. There isn’t a good plan or a bad plan, there’s only your plan. It will give you a picture of your current financial situation. How does it look? Are you on track to reach your financial goals? Do you need to make any adjustments? Will your fix be a tweak or a major overhaul?
Like a construction project, a financial plan can appear daunting. Here are a few suggestions to help you get started.
Take an inventory of your financial assets. Where are they located? Do you own stocks, bonds or mutual funds? Do you have a 401(k) or company retirement plan? If so, gather all your statements and put them in an investment folder.
Gather your important documents like tax returns, insurance policies, and Social Security statements. Put these items in your important documents folder.
Identify your income. In addition to your job, do you generate income from other sources? Royalties? Rental Income? Pension? Print your paystubs, W-2s and 1099s and put them in your income folder.
Create a budget or spending plan. Where is your money going? The best way to create a budget is to review your past six months of bank and credit card statements. Write down your expenses and then create categories like housing, shopping, groceries, entertainment, and so on. Once you’ve gathered this data, put it in your budget folder.
Do you have debt? Do you have a mortgage? Car loan? Student loan? Credit card debt? Print out all your statements that identify your debt levels, payments, balances and interest rates. After this is done, put your statements in a debt obligations folder.
Establish your goals. Do you want to travel the world? Buy a second home? Volunteer? Retire early? Start a new business? Leave a bequest? Write them down, all of them. Dream big. Once this is done put your list in a goals folder.
List your concerns. Are you worried about your finances? Are you concerned about running out of money? Market losses? Dying early? Living too long? After you write down your concerns and fears, put them in your concerns folder.
Once your exercise is complete you should have several folders identifying your assets, goals, and concerns. You now have the foundation for your financial plan. Schedule a meeting with your advisor or planner to hand over all your folders. They will review the data and build your plan. Simple.
You now have a financial plan to help guide you toward achieving your goals. I know you can do it!
Real men don’t use instructions, son. Besides, this is just a manufacturer’s opinion on how to put this together. ~ Tim Allen
May 29, 2019
Bill Parrott, CFP®, CKA® is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose.
Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation.