In financial planning, there are basic practical matters to complete for every individual, couple or family. These include: tax returns, an estate plan, insurance protection, an investment plan, and a cash flow plan.
Tax returns: Are your tax returns current and complete? If not, make it a priority to take action to complete them. Retain tax papers in a simple file system so that your documents are in order and accessible for tax preparation at the beginning of each year. Organizing and preparing early supports easeful tax preparation.
Estate Plan: Each person has an estate plan, whether it is intentional or not. An intentional estate plan is written and executed and will carry out your desires in the event of your demise. An unintentional estate plan is called an intestate estate. It means that you do not have a written will and in this situation, the state in which you reside will decide how your estate will be given to your heirs; the process will be more costly and time consuming as well. A basic estate plan includes a will, durable power of attorney and health care proxy (living will in some states). If you do not have these documents written and executed, consider them a priority in the area of financial management.
Insurance: There are various forms of insurance protection. Property and casualty insurance includes homeowners (or renters), automobile and liability. Medical and disability insurance relates to your health; life insurance relates to your survivors and estate. Long term care insurance protects your assets as you age, including your freedom. You may or may not need all of these forms of protection. If you do need them – and determining need can be an exercise in itself – take actions to obtain the most appropriate type of protection for your unique situation.
Investments: Your savings and investments can be categorized in two forms: retirement assets, such as, IRAs, Roth IRAs, company retirement plans, 401(k), 403(b), etc., and non-retirement assets. Retirement assets are owned in pre-tax investment accounts that receive a deferral on income taxes prior to distribution. Creating an investment plan means clarifying your goals, deciding how to manage your investments, and having a system (automatic bill paying, automatic savings, etc.) that supports your short and long term objectives.
Cash Flow: Your cash flow ties to all of the above topics. Cash flow is simply how your cash resources flow to all of the areas of your life that require money. Are you aware of who, what, where, when and how your cash flows relate to each of these practical categories? If not, address them one at a time as you choose to complete each category. For example, regarding your tax return preparation, be aware of the taxes you pay for the privilege of being a US citizen. Ask yourself who, what, when, where, and how questions so that you are taking responsibility for knowing what you need and want related to your tax return completion.
Who … benefits when I pay my taxes? … is the best support for me in preparing taxes?
What … are my beliefs related to paying taxes? … happens in the government system when I submit my payment?
Where … is my energy for preparing taxes? … do I send the payment to?
When … did my current feelings about taxes begin? … will the current tax system undergo another transformation?
How … does my tax preparation method I use create ease or anxiety for me? … can I minimize the taxes I pay, or streamline the process?
I encourage you to get curious and ask similar wonder questions for each of the financial matters you handle. The insight you gain from asking these questions builds courage, confidence and positive energy.
When you complete any one of the above, notice what happens for you in your body (thoughts, feelings and sensations). Register the completion with self-appreciations for finishing your finances. At the same time, notice your energy level and where you generate new enthusiasm for completing financial matters.