Q: WHAT IS A FINANCIAL PLAN AND WHY DO WE NEED ONE? 

  • A financial plan is a document that organizes your cash flow, savings, debts, investments and insurance. It’s a way to help you prioritize your financial goals and create strategies to achieve those goals. 
  • By creating a plan specific to your needs, you can alleviate unnecessary stress and set yourself up for success. 

Q: WHAT STEPS DO WE NEED TO TAKE?

Attack Your Debt 

  • Credit card debt is at an all-time high, and Americans paid more than $110 billion in credit card interest and fees last year.
  • Make it a priority to tackle your bad debt using the snowball method: Make a list of your debts from smallest to largest. 
  • Start by attacking the smallest debt first. Devote as much as you can to that card, while still making minimum payments on all your other debts.
  • Once that one is paid off, start on the second-lowest balance. Just like a snowball rolling down a hill, the key is building momentum each time you pay off a debt.
  • To get started, I have a debt worksheet on my website kingdompurposes.net

Build an Emergency Fund 

  • More than half of Americans don’t have enough cash to cover a $2,000 emergency.
  • We recommend that you keep about 3-6 months worth of savings in an easy to access liquid savings account for emergencies.
  • If you don’t have money saved in an emergency fund, unexpected bills may cause you to take on debt or tap into your retirement accounts. 
  • Even if you start by saving $100 a month, you’re off to a good start. You might also consider saving any newfound income. If you recently got a raise, put that money into savings. If you recently paid off a car loan or credit card debt, keep making those payments, but pay yourself by transferring the money into savings instead of sending it to the lender.

Increase Savings 

  • One of the best things to do if you are behind on saving for retirement is to increase how much you’re contributing to your retirement accounts. 
  • You can save up to $19,000 in your 401(k) and up to $6,000 in your IRA or Roth IRA. 
  • If you are 50 or older, you can save an additional $6,000 in your 401(k) and $1,000 in your IRA.
  • If you fund a Health Savings Account or HSA, try to fully fund it every year. You can save money in your HSA pre-tax and can withdraw money tax-free for qualified expenses. Any money left in your HSA rolls over each year and continues to grow. 

Q: IF RETIREMENT IS RIGHT AROUND THE CORNER, WHAT SHOULD WE BE DOING? 

Understand Withdrawal Strategies 

  • You need to create a plan as to how you’re going to withdraw money from your retirement accounts. The goal is to utilize different tax strategies so you’re paying as little in taxes as possible during retirement. 
  • One option is to convert your traditional 401(k) or IRA into a Roth IRA. 
  • You’ll have to pay taxes at the time you convert the accounts, but you won’t be taxed when you withdraw money in retirement.  
  • Another benefit of a Roth IRA is not subject to required minimum distributions, meaning you can leave money in the account for as long as you would like.

Talk with a Professional 

  • There are a lot of moving parts for people in or near retirement. When you are 5 to 10 years away from retiring, you should look for a financial advisor who can put together a full financial plan to help you grow your money and give you the confidence to retire.
  • We identify goals and dreams, create a tailored plan and deliver it with each client’s best interests in mind. We help show clients how to build a plan that works for them.