SIX KEY COMPONENTS OF FINANCIAL PLANNING

1.     Emergency Funds: Determine the necessary amount to be held in your checking and savings accounts as a safety net for unexpected expenses and emergencies.

2.     Major Purchases: Identify any significant expenses planned within the next 2-3 years. These funds should be kept liquid and not invested. Consider creating a sinking fund specifically designated for future purchases.

3.     Intermediate Investments: Once you have established an adequate emergency fund and a plan to fund major purchases, focus on intermediate-term investments. Examples include 529 plans, brokerage accounts, employee stock purchase plans, or stock options.

4.     Nest Egg Investments: Allocate investments that will serve as a future income replacement once you achieve financial independence. Consider employer-sponsored retirement accounts, individual retirement accounts (IRAs), and other long-term investment vehicles.

5.     Legacy Planning: Designate specific investments or assets intended to be passed on to heirs or charitable organizations. This may include highly appreciated stocks, real estate, or other assets. Additionally, life insurance, disability insurance, and long-term care insurance can be part of legacy planning.

6.     Important Documents: Ensure your financial plan is complete by organizing essential documents such as wills, trusts, powers of attorney, and medical directives. These documents provide clarity and guidance for your future financial decisions and the well-being of your loved ones.