I work at a civil engineering firm and a lot of my day is often spent either preparing or reviewing planning documents. Imagine if as an Engineer I would say “let’s not worry about design, let’s get started on construction and see how things go”. The results would most likely be infrastructure of the wrong size, wrong place, wrong purpose, and a waste of money. With this type of attitude I probably wouldn’t be an engineer for very long. Planning documents help us stay on task so we accomplish the goals we want.
Moving from the engineering field to the personal finance field the same logic can be applied. I have some general ideas of what I want, but right now I have the same “figure it out as I go” mentality. Do you ever feel the same way? I know that isn’t a correct way to plan, so why haven’t I done better? Maybe it is because I’m so far away from retirement I don’t really want to think about it. Maybe it’s because I know life is so volatile it is hard to make long term plans.
Don’t get me wrong, I haven’t been totally oblivious to planning for the future. My wife and I make and keep a monthly budget, and we save money for short and long term emergencies. I also have a retirement account that I add to from each paycheck. In fact my 401K account is what got me started thinking about making a financial master plan. This year my employer stopped matching our 401K contributions. That is a pretty big blow to my retirement. The problem is I don’t really have an idea of how big of a blow it is. How much will this affect my retirement?
This got me thinking some more about retirement and some of my financial goals. First off I would like to be in a situation that I’m not a financial burden to others. Second I would like to have enough money that my wife and I can help our children pay for church missions and education. I know these things can’t become a reality without some sort of blueprint to follow.
So, this month I’ve decided to make a financial master plan. The objective of the financial master plan is to show a way to accomplish the financial goals my wife and I have. I envision that this plan will change over time as life changes. Change is inevitable, but having a blueprint will help guide us in making the financial decisions we have today.
Here is the draft outline of the financial master plan document that I will be creating.
Financial Master Plan Outline
Section 1 – Personal Information
- Social Security numbers.
- Birth Certificates.
Section 2 – Emergency Contact Information
- Family Addresses and phone numbers
- Employer contact information
- Pediatricians, physician, Ophthalmologists, Dentist
Section 3 – Financial Accounts
- Bank Accounts – Account numbers and contact information
- Credit Cards – photo copies and contact information
- Retirement/Investment accounts – 401K, IRA’s, other. Balances/beneficiaries/contacts
- Insurance policies – health, disability, life, car, home. Balances/beneficiaries/contacts information.
- Real Estate – Mortgage company contact.
Section 4 – Financial Goals
- Guiding principles
- General short term goals (months)
- Specific long term goals (years)
Section 5 – Budget
- Explanation of how the budget is run.
- Copies of past year summaries
Section 6 – Financial Forecast
- Estimated long term income.
- Estimated long term expenses.
- Monthly average savings to reach long term goals.
The first three sections are basically a compilation of all the financial information for our family. These will be a great benefit to have all in one place during an emergency or crisis. I realize the dangerous possibilities if these documents get into the wrong hands. Of course this document won’t be put on-line, but I think it will need to be in electronic format (in order to update easily). I’m still debating on what I should do to protect it. Should I have it password protected, printed to a binder and put somewhere safe? Maybe you have some suggestions.
Section 4 will cover the goals we have as a couple. The meat of the section will be specific long term goals looking years ahead. The short term goals will most likely involve spending less than we make and getting out of debt.
Section 5 will cover the budget. It won’t be the budget, but it will explain how we do the budget. A few years ago I decided that I needed a budget to see where the money we earned was going. Due to the fact that my wife actually uses the budget it has been a success so far. The budget allows us to easily save money into categories and plan out each month. I’ll need to post another article about our budget. It may not be the best process for you, but it has been great for us.
Section 6 will be the financial forecast that will be the financial engine that shows us what we need to do now to be able to reach our goals. I envision that this will involve another spreadsheet (I’m an engineer – give me a break) that will take into account things such as future expenses and income, interest rates, and present and future values.
The information in these section will need to be periodically updated as things change such as income, interest rates, etc..
What Do You Think
So what do you think? Is there something that you thing you would add or remove in your financial master plan?
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