Financial Status Update: 4 Steps to Complete Financial Planning
“Whenever you begin any good work you should first of all make a most pressing appeal to Christ our Lord to bring it to perfection” (St. Benedict).
Have you made 2023 New Year’s resolutions? Maybe something about growing in your faith, working out, eating better, or losing weight? Among common New Year’s resolutions are finance goals: spending less, saving more, investing, etc. They’re great ideas, but do you know what your complete financial picture looks like? If not, do you feel a bit in the dark when you are making financial resolutions or goals?
Your complete financial picture includes not only your assets, debt, salary, retirement, and savings but also your health insurance, property insurance, life insurance, and estate planning. This information is a lot to track down and keep updated, but without it, it is hard to define realistic and necessary goals.
How many blessings has God placed in your life? How are you providing for them now and in the future? These are big questions. Why not use the beginning of the year to tackle them, feel confident in your future, and allow God to provide?
God challenges us to rely on him. When I make a financial plan, either for my family or for a client, I always make sure it is fluid and flexible. It needs space to allow God to work in it and to sometimes make changes. We cannot predict the future, but we can be prepared. A complete financial plan should include where you are now, goals for where you want to be in the future, and tangible steps or actions to get there. You also need to clearly define who is responsible for each step, and everyone involved needs to understand the reasons behind it.
Step 1: The Financial Pyramid
Understanding where you are now requires tracking down statements for all your accounts, your debts, your insurance, your tax returns, and your estate plan. Combine this information in one place that is easy to read, such as a folder on your computer or an envelope or physical folder. At our firm, we have clients fill out what we call the financial pyramid, a spreadsheet that summarizes and simplifies all the data they gathered (email me if you want a copy).
Step 2: Goals and Dreams
This is my favorite part. Think about your ideal future. What does retirement look like? When does it happen? Who or what do you want to give to or serve with? Do you want to pay for college for your kids? Do you want to get out of debt? By when?
While some of these topics can be a bit heavy, I encourage you to think big and realistically. Consider what dreams God has placed on your heart, and write them down with a deadline. After all, a dream turns into a goal when you have a deadline and actionable steps to make it happen. Put those goals with your summary of your financial picture.
Step 3: Look for Gaps
After you have all your information in one place, it is time to look at what is realistic and what is not: Create a plan, and look for any gaps in your current financial picture. This step is usually where a professional comes in handy (check out this article for tips on how to find the right financial professional for you). Financial advisers are trained to look at where you are now, your goals, and how realistic they are. Maybe you are not on track to hit them right now, or maybe you are overshooting them. We run numbers, look at inflation and the cost of living, and let you know where you stand. We also let you know where you are excelling and where you might need to put in a bit more effort.
Your financial life is complex and can be confusing. If you decide to look at it without an adviser, I recommend you start with your information gaps first. Do you have life insurance? Do you need it? Do you rely on your employer for your disability, life, health, and other insurance? Do you think those plans are enough, or should you consider purchasing something that’s not tied to your job?
Do you have an estate plan? How much are you saving for retirement or the future? Do you think you are on track? Do you have a plan for paying for college for your kids? Do you have a lot of cash in a checking account that you might want to invest instead?
The list goes on, but these are good questions to ponder. They are where I start when I am looking at someone’s financial pyramid. The right answers to these questions vary by person and by situation. Everyone’s finances, plans, and goals are and should be different. God created us that way: different.
Step 4: Action Items
Once you have a better grasp on where you are and what gaps there are in your financial picture, make a list of tangible steps to help you reach your goals. Maybe those steps should be New Year’s resolutions. Think about your priorities and what is most time-sensitive.
Be careful, though: When I say “time-sensitive,” I don’t necessarily mean what comes next sequentially. Bigger goals often need more time to achieve. For example, it is always best to start investing as soon as possible, so you have more years to benefit from compounding interest. The longer you can leave investments alone, the more money you will have in the long run.
Once you have some action items, make sure you set deadlines and reminders for accountability. You took a lot of time and did a lot of work; do not forget to follow through and, as always, take it to prayer. If God is not with you in your dreams and goals, they are simply wishful thinking and daydreaming. With God, all things are possible, as long as they are his will.
One last thing: Make sure your goals and resolutions are flexible. God sometimes throws us curveballs! When we are set in our ways and unwilling to let him speak to us, we will lack peace and may find ourselves fighting for goals we are not supposed to achieve. When we do God’s will and let him guide us, he brings us peace, even amid trials and suffering.
We do not always know why God does what he does, but we must always trust that it is good, true, and beautiful. As you make (and, hopefully, stick with!) your New Year’s resolutions, keep God in them, and enlist help where you need it. Whether it is sticking to a workout and diet routine or getting your finances in order, may God bless you, guide you, and bring you clarity.
Happy New Year!
Erica Mathews currently works for Financial Counseling Associates. She completed her course work for the CERTIFIED FINANCIAL PLANNER™ certification at the College for Financial Planning and is 3 months of experience away from completing her certification. She is passionate about helping families build their wealth so they can live out the calls God has places on their hearts. She lives in Colorado with her husband and four kids. They love everything outdoors including gardening, hiking, biking and simply exploring nature. If you would like to reach out to Erica, her email is erica@fca-inc.com.