Cashology by FNBO
Quarterback of Your Finances
The term financial planning quarterback – it has become a bit cliché. Sometimes it refers to having a financial advisor as your financial planning quarterback. Sometimes, and this seems to be growing in popularity, it refers to how you can be the quarterback of your own finances. And that’s what we want to talk about today. If you want to be the quarterback of your finances, what do you need to do?
If someone wants to be their own financial quarterback, where should they start?
- Sticking with the sports analogy for a moment, they need a good game plan.
- And when it comes to your finances that means a financial plan.
- So step one, really, is to develop a financial plan.
- And you don’t have to be a financial expert to do this.
- A financial plan is just a picture of your current finances.
- And it identifies what your financial goals are.
What does a good financial plan include?
- The plan needs to have all the details.
- Your income and cash flow.
- Your savings.
- Your debt.
- Any investments you might have.
- Information on your insurance plans.
- And just about anything else having to do with your money.
- It’s not a one-time thing but an ongoing process.
- You put a plan together and then revisit it.
- Looking at it and checking your progress once a month is a good habit.
- Dealing with finances can be stressful.
- And a good financial plan helps take away a good deal of that stress.
- Plus a financial plan is not just for the wealthy.
- Everyone should have a financial plan and take charge of it, like a good quarterback.
Tell us about what goes into a financial plan.
- Start with your goals.
- And those goals might be to save up a down payment for a house, build your retirement savings or to pay down debt.
- Paying down debt is a common short-term goal.
- Saving for retirement is a typical long-term goal.
- Make sure you know what you want to achieve with you plan.
- Make your plan serve your goals.
- Ask yourself where do you want to be financially in five or ten years.
- What type of retirement do you want to have?
- Start with your goals.
- The more they inspire you, the more likely you are to put together a good plan and to execute that plan over time.
What do they need to get into that plan to achieve those goals? What are some of the more concrete elements of a good financial plan?
- Track your money.
- Write down all your sources of income and how much monthly income you get from each.
- Write down all your expenses and how much they are every month.
- This way you can get a sense of your cash flow.
- And you can watch out for living beyond your means.
- Seeing where your money comes from and where it goes gives you the picture you need of your finances.
- See if you can put 50% of your incomes toward needs – mortgage or rent, utilities, transportation and other recurring expenses.
- See if you can put no more than 30% of your income toward wants – entertainment, clothing, discretionary spending.
- Then put at least 20% toward savings and/or debt repayment
- Use this picture to see if your income is being directed toward achieving your goals.
- If it is, stick with it.
- If it’s not, look for some ways to make some changes.
What else would a good financial quarterback do?
- Take advantage of every source of income.
- If your employer offers a 401-k and they offer an employer match, make sure you’re taking advantage of it. A lot of employers will match, for example, your contributions up to 3% or so of your salary.
- It can be a good way to build retirement savings.
- Make sure you have an emergency fund to cover unexpected expenses.
- A good rule of thumb is to have three to six months of living expenses socked away in an emergency fund.
- Get rid of high-interest debt, like credit card debt.
- Build your savings, that’s kind of obvious.
- But also build your retirement savings with your 401-k, a traditional or Roth IRA and, if you have kids, the 529 college savings plans.
Being a good quarterback is all about planning and preparation.
- Planning, preparation and execution.
- Don’t feel like every play has to score a touchdown.
- Just keep gaining yards, making first downs and you’ll soon achieve your goals.
- Clever Girl Finance: https://www.clevergirlfinance.com/blog/ten-steps-to-creating-a-solid-financial-plan/
- Money Under 30:https://www.moneyunder30.com/how-to-create-a-financial-plan-without-paying-for-an-advisor
- Smart Asset: https://smartasset.com/financial-advisor/what-is-a-financial-plan