How to Create a Four-Part Financial Plan

According to a recent survey by Northwestern Mutual, people who invest time in financial planning are happier than those who don’t. And they sleep better.

That doesn’t really surprise me. Without planning, you don’t really know if you are on track. And the stress of not feeling in control of your financial life can’t be compartmentalized. It affects us 24/7.

The survey also found that people who worked with a financial advisor were even happier and reported even higher levels of sleeping well. You know my take on this: Working with a financial pro is fine, but you must be actively engaged in all decision-making, as those decisions only affect the person staring back at you in the mirror (and those you love).

And you need to understand that you have all it takes to create and commit to a financial plan that will bring you and your family incredible peace of mind.

In fact, I think it might be helpful to break this down into four different plans.

Plan for how to get out of high-rate credit card debt.

There is never a great time to pay high interest rates, but with the Federal Reserve now raising its target rate, it is likely that credit card rates will increase as well.

If your credit score is high (above 720 or so) look for “best credit card balance transfer deals” online. Moving a high-rate balance to a new card that gives you a set period (a year or more) to pay down your balance with no interest is a great opportunity to pay down your debt.

I also want you to honestly review all your spending with an eye toward cutting out all “wants” so you have more money to put toward paying down your debt.

Plan for the unknown.

If there ever was a financial sleep aid, my vote goes for an emergency savings fund. My Ultimate Opportunity Savings Account at Alliant Credit Union remains one of the best deals around (read more about it below).

Plan for taking care of an older you.

Are you contributing as much as you can to your workplace retirement plan or IRA? If you are nearing 62 or so, have you begun to consider whether you might be able to delay starting Social Security? You will earn a much higher benefit if you wait until your full retirement age (between 66 and 67 depending on your birth year). Waiting until age 70 earns you the highest possible benefit. I also want you to start planning for how you will be able to cover having at-home care later in life since Medicare does not cover it. You can save more in your retirement accounts to prepare for this cost, or you can consider getting a long-term care insurance policy. LTCI can cover at-home care and can also be used to pay expenses if you one day move to managed care.

And there is no excuse for not having the essential documents that will make sure you are well taken care of later in life. The financial power of attorney is one of the MUST HAVE™ Documents that ensures whoever you appoint can step in and manage your finances if you ever become unable to handle things. A health care proxy (paired with your advance directive) is the person you appoint to advocate for your medical wishes if you are ever unable to communicate with your medical team.

Plan for passing on.

A will and a living revocable trust are the other Must Have Documents that will bring you peace of mind. With both of these in place, you will have made it as easy as possible for your assets and belongings to pass to the heirs you have laid out in those documents.