Page 102 - December 2021

FINANCIAL PLANNING
THE IMPORTANCE OF A FINANCIAL PLAN
In light of the new year, I thought it would be fitting to talk about goals. Most people write down some things they would like to accomplish throughout the year and call it a New Year’s resolution. Did you know that only 8% of people who set New Year’s resolutions actually achieve them?
According to studies, people who write down their goals and track their progress are 50% more likely to achieve their goals. If you want to be in that 8%, you might want to consider creating a plan. This is an excellent way to track your progress toward your goals. While writing down what you want to accomplish, you might consider putting a financial plan
on that list. Starting young proves to have the greatest advantage. The idea is to have your race horses pay the bills when you retire, but I think we can all agree it doesn’t always turn out that way. As a matter of fact, the net sum of horse racing usually ends up in the red.
Putting together a financial plan can give you a good idea how much you can spend on your race horse addiction while still providing for your basic living needs. In the following article, I will attempt to show you the importance of a financial plan and how beneficial having one could be to you and your family.
THE PURPOSE
You might have heard about a financial plan before but aren’t exactly sure what it entails. Think of it like this: a financial plan is a road map that will take you to your
desired destination. It’s like building a home that will shelter you for the rest of your life. There are several compelling reasons to set up a financial plan.
First, doing so can help you organize all of your financial affairs. It’s all too common for people to be completely scattered financially.
Second, it makes you think about your goals and how much you want to spend in retirement.
Third, a plan will show you what action items you need to take in order to achieve your ideal retirement.
I’ve built many financial plans for people with all types of backgrounds, goals and objectives, and the one thing I have noticed
is the confidence it brings people after it’s completed. Even if the plan isn’t forecasting overly successful, you’ll know what you need to do in order to be on the right track.
STARTING THE PLAN
A financial plan is essentially preparing for the future. A big part of that is listing out the goals you have for retirement. This could be anything you can think of. We commonly see race horses in the plans we create.
Without goals, what is there to plan for? Items that will be listed in your plan are things like basic living expenses, vehicle purchases, out-of-pocket healthcare costs and other common expenses. Having a dollar amount for your goals can be just as important as the goal itself.
The next part of the plan is listing out your reliable income. Reliable income consists
of pensions, social security, rental income
or any other income source that you may have. This information is used to see if this
is enough cash flow to cover your basis living expenses. If not, we will have to bridge the gap with your retirement assets that you have put away.
Everything is connected with a financial plan. One account or asset could be the difference between a highly successful plan and a plan that falls short.
by Cade Peterson, Financial Planning Associate
100 SPEEDHORSE December 2021