By Jon L. Ten Haagen, CFP ®
My question to just about every investor‘ is, “If you do not know where you are going how do you know when you get there or if you are there at all?” You don’t jump in your car and head off to Chicago if you don’t have a road map or a GPS that can give you midcourse corrections during your journey. I guarantee you will hear “recalculating” more than once and if it is a long trip probably many times. This is how financial planning works. We generate a plan based on your input, what you want to accomplish, and then we create a game plan based on your specific needs. After a while things happen or change, such as a birth, death, marriage, divorce, medical situation, at which point we get together again and see if the original plan still works for your current needs and comfort levels. This is the right way to get started.
The first part of the financial puzzle is to assess your current situation to do that you have to create a budget and balance sheet for both you and your spouse. This will tell you what assets are coming in from employment (salary, wages, tips, business income), then investments – taxable interest from CDs, savings accounts, etc. – non-taxable income from bonds, dividends, rental income and partnership income. Other sources to look to are alimony, child support, pensions, social security benefits and other income; this will give you your total monthly income.
Next you look at expenses like taxes, federal, state, FICA and real estate. Loan payments, such as mortgage or rent, auto loans, credit cards, education loans, other installment loans (the new boiler). Now comes insurance – life, auto, homeowners, long-term-care/disability income, medical/dental and liability.
Now let’s look at household expenses, such as food, clothing/laundry, utilities (electric, heat, water, phone), household repairs/maintenance, auto expenses (fuel/maintenance), other transportation, recreation/travel, entertainment/dining, charitable contributions, unreimbursed medical/dental, child care, education expenses, etc. This gives you the total monthly expenses.
Take the total monthly expenses minus the monthly income and do you have a plus or a minus? Hopefully it is a positive cash flow. Whether it is or not, you should now go through the numbers and see where you can massage them to get more on the positive side. Look at if you pay the auto insurance monthly? If so change to once a year, which will eliminate a service charge each month. Little things like this build up over time and help you get that much closer to your goals.
If you would like to go to our website (Tenhaagen.com) and ask for a blank budget and balance sheet for you to work with. It is free and our pleasure to help. Another form to help you is the document locator, which helps you organize your important papers and make it easier for your executor and others to find things like the key or combination for the safety deposit box, the location of your will, insurance policies, which professionals to call and their contact information.
We are here to help you get started and continue to make progress toward your ultimate goal: A safe and comfortable retirement. Give us a call and let us help guide you. You should not have to focus on these issues, that’s my job. No one I know can do it all alone. Happy New Year, and a wonderful healthy, happy and prosperous 2017.
Huntington’s Jon L. Ten Haagen, CFP, runs Ten Haagen Financial Services, Inc., a full-service independent financial planning firm, and he is here to answer your questions. In this bi-monthly column, Ten Haagen will answer your financial questions and help you with his expert financial advice. Don’t be shy, our expert is here for you, so feel free to ask away! Email your questions to firstname.lastname@example.org today, and let our expert help you.
*Ten Haagen is an Investment Advisor Representative offering securities and advisory services offered through Royal Alliance Associates, Inc., member of FINRA/SIPC, and a registered investment advisor. He is also an active community member, serving on several nonprofit boards and as executive officer of the Greater Huntington Boating Council.
**BACK IN HUNTINGTON: The offices of Ten Haagen Financial Services, Inc. have moved back to 191 New York Ave., Huntington. Friends and clients are welcome to stop by, check out the new office and share a cup of coffee with the expert!