Financial planning often seems like an unending task. It is a lifelong journey that requires careful consideration and proactive decision-making. Just when you think you have achieved it all, you may face another new financial concern or necessity. This is where a financial to-do list may be helpful. Regardless of your age or income level, managing your finances and planning for the future is crucial. From building a strong financial foundation to making informed investment choices, there are several key elements that can be covered in your financial planning to-do list.
A financial advisor can help you make a financial to-do list that lists all of your financial needs and concerns. This article will further discuss how you can benefit from making a to-do list for your personal finances and what to include in it.
Why is it important to have a financial to-do list?
Financial planning has multiple components. Moreover, financial planning can mean different things to different people. For someone, it could be about reducing debt and making ends meet; for others, it could be about capital appreciation and chasing high-end goals. No matter your goals, a financial to-do list can help you stay organized and ensure that your important financial objectives are met. It allows you to break down your goals into actionable steps. This makes it simpler to track your progress towards them and your achievements along the way.
To-do lists can help with long- or short-term goals and managing tasks and financial planning. For instance, you can utilize a to-do list to track your monthly essential spending and aim to complete those tasks by a specific date. Doing so will give you a clear picture of your financial obligations; you can allocate the remaining balance accordingly. Let us consider an example using data from the United States Bureau of Labor Statistics (BLS) in 2021. Women’s median weekly earnings were $900, which equates to an approximate average monthly salary of $3,600. Suppose you allocate $2,500 for your essential expenses at the beginning of the month. This leaves you with $1,600, which you can consider investing or allocating towards other financial goals.
A well-structured financial to-do list can also help alleviate financial stress. It can offer you clarity and a sense of control over your money. It enables you to adhere to important deadlines or due dates and ensures you do not neglect crucial financial matters.
Moreover, creating a to-do list is not hard or time-consuming. You can do it in under an hour. If you have a day off, consider tackling your to-do list. You can also do it in the subway on your way to work.
What should you include on your financial planning checklist?
A financial planning list serves as a roadmap to keep your finances on track. While it does not have any fixed components and can be tailored to suit your purpose, here are some general things that you can add to your to-do list:
1. Include a budget for your recurring and planned expenses
The first step in financial planning requires you to make a budget. If you do not already have one, put it on your to-do list. Many people try to keep track of their expenses but lose track mid-way due to busy schedules, forgetfulness, etc. Using multiple modes of payment, like cash, credit cards, debit cards, etc., can also make it hard to monitor your expenses. Therefore, irrespective of how attentive you may think you are about your money and where you spend it, it can always help to create a formal budget. You can use a budgeting app or do this manually. You can also create an Excel sheet with different heads, such as essentials, non-essentials, debt repayments, expenses planned for the coming month, any extravagances from the past month, etc. This can help you understand how much you are likely to spend for a concerned month and whether or not you need to adjust in one month to make up for another month. For instance, if you have a significant planned expenditure coming up, you may cut back a little in the preceding months. Likewise, if you have spent more than you anticipated last month, you can spend less this month to ensure your overall financial goals are not impacted.
2. Check your credit score and history
Lenders, landlords, and other financial institutions often use your credit score and history to assess your creditworthiness. Your credit score plays a significant role in determining the interest rates you may qualify for when borrowing money, such as a loan or mortgage. A higher credit score can help you secure lower interest rates, potentially saving you money in interest payments over time. On the other hand, a lower credit score can increase the interest you qualify for, thereby amplifying your liabilities. Your credit score may even play a role in being approved for an apartment/house on rent. So, when you create an annual financial checklist, include checking your credit score in it. This knowledge will help you alter your financial habits, plan for your debt needs, and be more mindful of your money.
In addition to checking your credit score, it is also important to monitor your credit history. This can help you identify areas where you can make positive changes to strengthen your creditworthiness. Checking your credit history will help you look for errors or discrepancies that could negatively affect your creditworthiness. You can detect any signs of identity theft or fraudulent activities and verify the accuracy of the information being reported. If there are any inconsistencies, you can alert the concerned authorities and protect yourself financially.
3. Calculate your net worth by taking into account all your assets, savings, and investments
Calculating your net worth helps you understand your current financial position. It provides a comprehensive snapshot of your overall financial health and helps you evaluate your assets and liabilities. Not a lot of people keep track of their net worth. While people may have a general idea of the value of their assets and the money lying in their bank, they may not understand the worth of all of their assets minus liabilities at any given time.
It is essential to calculate your precise net worth. This can help you determine how much you can save, invest, or allocate towards various financial goals, such as retirement, education, or debt repayment. Calculating your exact net worth also helps you determine whether your net worth is increasing or decreasing. This can help you take corrective action at the right time. For instance, if your liabilities exceed your assets or balance them out completely, it may be time to adopt strategies to eliminate your debt and increase your investments. You may have to live frugally for some time to increase your savings and investments.
Your net worth can also serve as motivation to improve your financial situation. When you see your net worth increase over time, you may feel encouraged to continue making better financial choices and achieve your long-term financial goals.
Calculating your net worth gives you a clear assessment of your wealth accumulation. It takes into account all your assets, such as cash, investments, real estate, possessions, and your debts and liabilities. This assessment enables you to evaluate your financial well-being and make informed decisions about wealth management.
SPONSORED WISERADVISOR
Need a financial advisor? Compare vetted advisors matched to your specific requirements.
Choosing the right financial advisor is daunting, especially when there are thousands of financial advisors near you. We make it easy by matching you to vetted advisors that meet your unique needs. Matched advisors are all registered with FINRA/SEC. Click to compare vetted advisors now.
4. Track your retirement account balances
It is important to track your progress toward your retirement goals, which is why you must add checking your retirement account balance to your financial planning checklist. Regularly monitoring your retirement account balances, such as 401(k)s, Individual Retirement Accounts (IRAs), and others, provides a clear understanding of how much you have saved and what you need to do to save more. It helps you assess whether you are on track to meet your retirement income needs, how well you are doing for your age and income, if your investments are aligned with your goals, and more. You can increase your overall financial awareness and stay up to date with the current value of your assets. You can evaluate the performance of your retirement portfolio, monitor individual accounts and investments, and understand the impact of fees and taxes on your returns. This can help you make informed decisions regarding your retirement savings strategy, the accounts you choose, and the investments within them.
For instance, you can assess whether your current contribution rate is sufficient to meet your retirement goals. If your account balances are not growing as expected, consider increasing your contributions to accelerate your savings and compensate for any shortfalls. You can also review your asset allocation and make any necessary adjustments. For instance, you can rebalance your portfolio, diversify it with an appropriate mix of asset classes, and more.
Checking your retirement account balance is particularly important if you are nearing retirement. By knowing your retirement account balances, you can estimate the income stream they may generate during retirement. This can help you make crucial decisions, such as determining a retirement age, postponing retirement, working part-time in retirement, and more.
5. Check the value of your tax liabilities
A personal finance checklist should also include reviewing your tax liabilities. Monitoring your tax liabilities helps ensure that you comply with tax laws and regulations and that nothing is overlooked or forgotten. It ensures you meet tax deadlines and avoid penalties or interest charges associated with late or underpaid taxes. It helps you identify any potential errors or discrepancies in your tax filings and reduces the risk of fines, audits, or additional taxes. It also contributes to your overall financial awareness. Just knowing how much tax you pay and how you can lower it provides you insights into the financial impact of your income and deductions. It helps you make informed decisions about your investments based on their taxability. It also enables you to streamline your finances and work towards achieving your financial goals without letting your tax liabilities come in the way.
Further, knowing your tax liabilities allows you to plan and budget for your upcoming tax payments. It helps you anticipate your future tax cut, set aside adequate funds to meet your tax obligations, pick investments that can minimize the financial strain of tax, plan your withdrawals to optimize tax, etc. It also allows you to engage in effective tax planning and use strategies like tax loss harvesting, claiming tax credits, and exemptions that apply to you.
6. Set new financial goals
As life moves on, you may have newer financial responsibilities, needs, and liabilities. Your income will change, your family's needs will alter, and you may have a different outlook on financial success. This is why it is important to set new financial goals. You can start by assessing your current financial situation and paying attention to your income, expenses, savings, debts, and investments. This will help you understand where you stand financially. Next, you must determine what matters most to you and align your financial goals accordingly. For instance, if you are creating a financial to-do list at a time when you are also thinking about starting a business, put this goal on the checklist. This will help you prepare better. Similarly, you can add other new goals like saving for the down payment of a house, saving for higher education, planning for retirement, etc. Prioritize your goals based on their importance and time horizon. For example, you may have to start a business the next year and have 15 years until retirement. This will help you adopt the right financial strategies for both goals.
Setting financial goals also provides clarity and direction for your financial journey. It gives you something to strive for and helps you stay disciplined in managing your finances. You also get a benchmark against which you can measure your progress.
To conclude
A financial planning checklist can be a simple yet effective way to tackle your financial concerns, chase your goals, and adopt a proactive approach to money. It can help you create a roadmap for the future and establish a bar to measure your progress. It can also guide you to make better financial decisions and learn from your mistakes. Creating a to-do list requires a thorough review of your financial situation. This keeps you engaged and informed about where you stand.
Use the free advisor match service to find a financial advisor who can help you prepare a financial to-do list and plan ahead for the future with greater efficacy. Answer a few simple questions about your financial needs and our matching tool can help connect you with 1-3 advisors most suited to meet your financial requirements.