Your Financial Plan- Part Deux

May 2, 2013 § Leave a comment

The kids and I (2)

A financial plan covers your entire financial picture: your assets and liabilities, your risk management, your financial goals and whether or not they are realistic. Financial advisors offer plans and because they are so extensive, there is a cost to have one developed for you. Last week I explained net-worth, debt-to-income ratio, cashflow and budget. This week we wrap up the financial plan components.

Risk analysis – Depending on the results of your net-worth statement and your budget and the existing and various insurances you have, you are now able to determine if where you or your loved ones are lacking. Managing risk is what life insurance, professional liability insurance and personal property insurance is about.  If there is a gap in what you have compared to what you need you may want to fix that gap or face self-insurance. Self-insurance is when you use your cash to cover the loss entirely. If the cost of insurance is cheaper, I vote for additional insurance.

Debt repayment – When will your debts be paid off? Do you want to press forward with a more aggressive repayment plan? Where will you start and how much will you allocate to that priority? This is a personal preference. Just don’t short-change your savings.

Savings plan – speaking of savings, please remember that the same compound interest that occurs with your debt and interest rate, occurs with any savings. Money saved and earning compound interest adds up more quickly as each period’s principle and interest earns even more additional interest. That works like a lovely compost pile, cooking and growing as year after year passes. Compound interest is a very good thing.

 For more information check the internet or your local library for details on creating a financial plan or contact a financial advisor. (CR9155)





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