Reader mail: Getting started with financial planning

by James
(Cali)

I really like what you explain in this article and agree with what you are saying. The issue is how to go about implementing some of these ideas. My wife and I want to make sure that stay on top of our finances and feel we need some help. We have started talking to a financial planner to see how to best put together a plan for retirement and to buy a home in the next couple of years. He suggested to start putting some money towards mutual funds but I don't feel that is going to be enough. How would you suggest getting started on putting together a long term plan?






LM says: James, I think I understand where you are coming from because I have been there. Back in 1996 when I was starting out in the Air Force after I graduated college I found myself in a similar position. I wanted to start putting some money away and I had a slight idea of what I wanted to do but not sure how to do it. Like you my wife and I went to a financial planner who specialized working with military families and he put us on a plan to have money automatically drafted from my paycheck into a Roth IRA that was then invested in a mutual fund.

I believe that started somewhere around $100-150 a month which was all we could do at the time but we kept increasing that amount as my salary went up. You can see the detail of that personal finance tip here but the point is that it grew and grew a lot more than I could ever imagine. The only change I would have made to that would be to pick mutual funds with lower fees than the ones I had back then. That is a common occurrence with mutual funds sold by financial planners, so watch out.

So at this point where you are at starting small might seem like it’s not going to do much but what you need to focus is that first you have to create the habits of building wealth and second you have to start, period, even if it’s small.

The next thing you want to do is to figure out where you want to be financially in 3, 5, 10+ years from now. That might be hard to do now but forming that picture of what you want your future to be will allow you to set goals that you can start working on now. Then your financial plan becomes this set of goals that you guys have set for yourself and the actions that you have to take to achieve those goals. Whether it be buying a home and putting 20% down, paying off debt, paying for kids college education, achieving a net worth of one million, etc. Get in touch with what you both want to achieve, where you want to go and then start working on it. Don’t get hung up on the details, just set goals and start working on them . All the steps you need to take might not be clear now or they might feel overwhelming but just set small achievable goals focus on those and things will start taking shape and become more clear as you progress.




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