A Checklist for a Strong Financial Plan

Decide What Will Give You the Security and Freedom You Desire

Do you know the elements that make up a strong financial plan?

While my husband Mike and I have been following our financial plan for more than 18 months now and have made great progress on paying off our debt, we still have a few items we need to take care of.

The missing pieces are critical to the health of our financial plan so we are adding them to our financial goals for the month of March. Without these pieces we are putting ourselves and our family at unnecessary risk.

To make it easier for you to implement these steps and build a solid financial plan for your family, I have created a free download.

On this free checklist, I have broken down the pieces into three categories — the foundation, the building blocks, and the protection. Think of your financial plan as a house. You first need to lay a solid foundation, then you build it up, and finally, you protect it from crumbling down.

Download your checklist for free and dive in to creating your own financial plan. Click here to instantly download your free copy of “A Checklist for a Strong Financial Plan That Will Give You the Security You Want and Lead You to the Freedom You Desire.”

Here are the elements of a strong financial plan and the reasons why each item is critical to the stability of your family’s financial health:

The Foundation:

These are the core pieces that will provide the stability to reach your long-term financial goals. While each piece listed below is important, the items in this group are what you should start with when building your financial plan.

☐  Written Goals – Writing your financial goals will provide clarity and direction for your entire financial plan. As Lewis Carroll, the author of Alice in Wonderland, once said, “If you don’t know where you are going, any road will get you there.”

☐  Net Worth Analysis – Calculating your net worth will clarify your current financial picture. Your net worth is the difference between the total value of your assets and the total balance of your debt.

☐  Monthly Budget – Each person or family should have a written budget that is updated monthly. This document outlines your expenses and details how you plan to allocate your income to your expenses, saving plans, and avenues for giving over the next month. It should be updated monthly, as your circumstances may change from month to month.

☐  Will or Estate Plan – Each person should have a will or estate plan, even if you don’t have any children or many assets. However, this is absolutely crucial if you do have children and/or own a house or any other type of property. If you don’t have a will and you were to die today, what would happen to your children and/or your home? Dying without a will would add unnecessary burden to your loved ones as the courts would decide who would receive your property and take guardianship of your children.

☐  Debt Elimination Plan – If you have any kind of debt, then you need a plan to get rid of it. The average American household has $203,067 of debt with $15,611 of it on credit cards. We use the snowball method to eliminate our debt, but use whatever works for you and stick to it.

The Building Blocks:

These are the pieces you will use to build your financial house and help you achieve financial security and eventually, true financial freedom.

☐  Emergency Savings – A major obstacle that has the potential to throw your financial plan off course and prevent you from reaching your goals is an unexpected emergency. If you have any type of non-mortgage debt, then build a starter emergency fund of $1,000 to $5,000. If you don’t have any non-mortgage debt, then build this up to 3-6 months of expenses.

☐  Retirement Savings Plan – In this day and age, Americans must take retirement planning into their own hands. Social Security benefits are likely to continue to decrease as time goes on, and most employers today offer defined contribution plans instead of pension plans. This shift has put the responsibility of retirement planning into the hands of employees rather than employers. A retirement plan could include participating in a 401(k) plan at work, contributing to a Roth or Traditional IRA, and additional investments in a separate brokerage account.

☐  College Savings Plan – If you have children or foresee yourself needing a higher education in the future, then having a plan for college funding should be on your list. Once you have paid off your non-mortgage debt and have a plan for funding your retirement, your next focus should be on saving for your kids’ college expenses. 529 plans and ESAs (Educational Savings Accounts) are two of the best options.

☐  Giving Plan – In order for your financial plan to be well-rounded, you must give to others. Whether it be as a tithe to your church, a gift to a friend in need, or a donation to a charity for a cause you feel passionate about, give to those who could use your financial assistance. Even donating a few dollars will warm your heart and provide you with a feeling of satisfaction as you display generosity toward others.

The Protection:

In building your financial plan, you need to protect what you have created. Insurance will protect you from potentially catastrophic occurrences that could tear down the financial home you have built or derail you on your journey to financial freedom.

☐  Health Insurance – As of January 1, 2014, most Americans are required to have health insurance coverage under the Affordable Care Act. Health insurance provides protection from high costs associated with a serious accident or illness. A broken bone can easily thwart your progress toward meeting your financial goals if you don’t have insurance to cover the medical expenses.

☐  Auto Insurance – In the U.S. you are required to have auto insurance coverage if you drive. I recommend shopping around for lower rates, but this is not an expense that you can get away with cutting from your budget.

☐  Homeowner’s/Renter’s Insurance – Just last spring, the apartment where my brother-in-law and sister-in-law were living burned down. They lost roughly 95% of their belongings, but luckily they were home and able to get their dogs got out safely before the fire became uncontrollable. They were smart and had renter’s insurance, so slowly but surely they were able to replace their lost items and find a new place to live. If your home were to be damaged in a fire or get burglarized, having sufficient insurance coverage would make the horrible event a little less terrible.

☐  Life Insurance – If you have any amount of debt, then you should have life insurance to cover it when you die. It is often recommended to have 8-10 times your annual income in life insurance, but determine an amount that is appropriate for your situation. In case something were to happen to either of us, Mike and I have enough life insurance for each other to pay off all of our debts, cover college funding for the kids, and give the other the option to take time off work for a while. We both have a policy through an insurance company, and Mike has a policy through his work, as well.

☐  Disability Insurance – According to the Social Security Administration, a 20-year-old has a 1 in 4 chance of becoming disabled before reaching his retirement age. Consider if you were to become injured or ill and were not able to work for several months. If your income stopped, would you be able to meet your financial obligations? If not, then you probably need to get disability insurance. Most employers offer sufficient coverage, but you may want to look into getting additional coverage as well.

By the way, for insurance, we like USAA a lot.  Their customer service is first rate and their rates are extremely competitive.  Check them out if you get a chance.

My hope is that this checklist will empower you to get started on creating your own financial plan if you don’t already have one. Or, if you are like us, you may find some pieces that are missing from your existing plan that may be putting you and your family at risk.

Set a deadline for checking off each item, and before long, you will feel more secure about your financial situation and have the satisfaction in knowing that you are working toward true financial freedom.

Click here to instantly download your free copy of “A Checklist for a Strong Financial Plan That Will Give You the Security You Want and Lead You to the Freedom You Desire.”

What About You?

Participate in the conversation. Is there anything that I missed? What would you add to the solid financial plan checklist? Share in the comments below.