Everyone Needs a Financial Plan

Jim has a simple approach to money with his five-point plan for financial fitness called PRITE:

Protection: Insurance is the cornerstone of any firm financial foundation. These products cover you, your family or your business from life events that can expose you to financial loss. In most states, auto and homeowners insurance is mandatory. Many employers offer ancillary benefits like disability and life insurance as a value added inducement for recruiting and retaining employees. Risk management can save you tens of thousands of dollars over a lifetime and a lot of heartache.

Retirement: As a matter of history, retirement is a new cultural phenomenon. But it’s now part of our society and everyone needs to manage to it. Longevity is a substantial risk for retirees; so having enough money for 25 to 30 non-working years is well within the current mortality tables. Retirement planning needs to incorporate not only investments and savings vehicles, but also the impact of taxes, medical and eldercare. Planning is of the utmost importance for most seniors because every dollar saved in taxes is cash in your pocket.

Investments: Everyone needs to develop a financial profile that includes a risk tolerance test, financial goals that have specific timeline horizons and cash flow projections for ongoing contributions. Creating a financial profile can help you establish your psychological attitude towards money or your own psychonomics. Your profile then becomes a reference point on all money decisions you’ll make in life.

Tax Planning & Preparation: If you constructed a budget that outlines every domestic expense, you may find that taxes are the greatest cost to consumers. The U.S. tax code is a convoluted marginal progressive system that needs to be understood and “gamed.” You need to know your deductions, exemptions and tax credits to be able to legally game the system and pay only what you have to pay.

Estate Planning: Surprisingly, most Americans don’t think their assets are worth protecting from transfer taxes at death because the unified credit is well over 10 million. But in reality, state taxes, the cost of probate, and marketable securities can trigger unforeseen taxable events for the surviving spouse and beneficiaries. To mitigate these expensive occurrences estate planning is a must for most.