A financial plan is a comprehensive statement of your financial goals and objectives that includes a detailed saving and investing strategy designed to help ensure your long-term security and well-being. A financial plan helps you evaluate your current financial state, identify goals for your future and make a concrete plan for financial success. This plan can serve to prepare you for anything and gives you and your family a financial roadmap so you can focus on the mission.
Assess Your Current and Future Needs
The main elements of a financial plan include a retirement strategy, a risk management plan, a long-term investment plan and an estate plan. It also must take into consideration such long-term goals as purchasing a home and paying for college.
Think about your current income, expenses and debts — and how those might change through each phase of life. Here’s what you’ll want to consider as part of your plan.
- Review your total income. Check the Department of Defense’s active-duty basic pay tables.
- Determine what kind of debt you have. Knowing this can help you determine what needs to be paid down first.
- Make a spending plan. Track all the money you bring in and what you spend for a month, then review the numbers and make adjustments to save more and pay down your debt. Listen to this Military OneSource podcast and get more information from this article.
- Create security for later. Think about what the future holds for you and your family, and ask yourself: What kind of financial cushion will we need to face life’s milestones? Identify what you want to save for and create an actionable plan.
- Assess your risk management. Assess your insurance coverage. Are you covered by life, disability, personal liability, property, casualty and catastrophic insurance? Do you have emergency savings? Make sure you and your loved ones are covered in case something happens.
- Build an emergency fund. Financial advisers usually recommend saving three to six months of living expenses in case of an emergency. This should be the first step for anyone looking to build their financial security. If you’re currently deployed, you may want to consider the Department of Defense Savings Deposit Program and earn 10% interest on your savings.
- Save for college. If you think paying for college for yourself or your children is in the future, you may want to look into different options for financing a college education, such as a 529 plan.
- Save for retirement. Although it might be hard to imagine now, saving for retirement is one of the most important ways you can secure your financial future. Service members and federal employees can take advantage of the Thrift Savings Plan to grow their retirement funds. You can also look into opening a separate traditional or Roth IRA for your own personal account.
- Invest for growth. You have many investment options for growing your personal fortune. Make sure you understand the relationship between risk and return before you start investing. You may want to explore your options with the help of a personal financial counselor.
- Start estate planning now. You should complete a will, a power of attorney and a living will, and set up trusts to make sure your loved ones are cared for in the event of your death. Military OneSource has information on estate planning, and you can also use the Armed Forces Legal Assistance Locator or make an appointment at your installation’s legal assistance office.
Stick to your new financial plan
Concerned about sticking to your financial plan? Try these strategies:
- Make it automatic as much as possible. Automated savings drafts or credit card payments can help keep you on track for your goals.
- Write it down. Putting your goals in writing can remind you what you’re working toward when things get tough.
- Find opportunities to save. Did your grandmother give you a big check for your birthday? Was your year-end bonus more than you expected? That’s great – now use those windfalls to help build your savings.
- Be patient. Managing your debt and saving money takes time. Don’t expect major financial changes to happen overnight.
Review your financial plan
Remember, a financial plan is a living document. Things change. Goals and objectives change. Life happens. Make sure you revisit your plan at least once a year to ensure you’re on track, or to make any adjustments for changes in your circumstances such as getting married, the birth or adoption of a child, divorce, etc.
You can find plenty of resources to get you on the right financial track. Visit a personal financial manager or counselor at your installation Military and Family Support Center. For more information, visit the Office of Financial Readiness website. You can also talk for free to one of Military OneSource’s financial counselors to start managing your money more effectively today. The DOD’s personal finance app, Sen$e, can also offer you pointers on understanding and achieving financial success. Download Sen$e for IOS or Android.