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How to be your own Free DIY Financial Planner in 15 steps?

Updated 06/10/2024.

1) The first step is to know what is your personal objectives and goals by using a Financial Planning session(s)?

2) What is your short term, medium term and long-term life goal(s)?

3) If money was not an object, where would you see yourself in 5, 15 and 30 years from now? (Hint: it can be a career, where you like to live, education, car, house, etc.)

4) Prepare a budget of current expenses and included all sources of income. How would you rate yourself compared to income below budget, at the budget, or above budget?

5) Now complete a second budget showing the amount you reduced from your original budget. If you’re still above budget, you will need to find other sources of income or further ways of cutting of expenses. If you’re below or at budget, you can move to the next point. If you like this guide share it on Pinterest or another social media.

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6) If you still cannot find additional ways to cut your budget? I do will help you find ways to save you more. I have a lifetime of experience to save money.

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7) Congregations! You are ready for the next step in the process. You must take at least 10% of your income each pay period and place 6% in retirement and 4% into a general fund which includes emergencies, and vacation fund. I would recommend one to increasing this account each year and every year by 1% or 2% to your retirement fund.

If the additional fund is available to give to religious/spiritual origination, or/and charities do so at 10% of income. You will gain a tax advantage and do some good in your community. What if you do not have the available funds? You can donate your time to these organizations. There is a note in my process of reading the most successful people have always given money and/or gave their time. This relationship with the law of attraction, that giving will help you get back more in the future. See this is more about the law of attraction in the further on in this book.

8) Things happen, you will need to have insurance to cover unexpected liabilities, Including health, auto, home, life and disability insurance. Remember getting the lowest cost insurance maybe not cover all your need in the event of accident or death, or disability. If money is a concern rather buy employment-based life and disability, insurance. Rather than not having enough coverage or having no coverage. Once you improve your situation buy a non-employment related insurance policy or use the employment-based insurance to be the gravy and not to meet minimum liability.

9) What is life insurance better for me Term or Cash Value? I would say most people that cash value is not needed in most cases. I would first max out my IRA, or Roth IRA, or 401K, or similar retirement program before even thinking of going for a cash value life insurance policy. These whole life and universal life are good for people that have too much money and looking for a tax shelter.

In most cases, a 30-year term life insurance product will protect you and your family so you can build enough funds by investing in your personal savings, and retirement Financial Planning. Most insurance agents disagree with this way: (sure they are losing money in the form of commissions). The facts that most fixed-rate cash value insurance policies are making about 4.5% - 5.5% great for today. But the stock market has an average return of 12%. So, using simple logic how are you better going after 5.5% vs. 7% or 9% return in a bad year? Yes, there is a risk; there are risks being too safe as well.

10) Where are going to put your money to grow? If your employer offers a 401k or a similar retirement program, and gives you a match this is the way to go. At least take the money the employer is giving you and match to the max. You would be surprised how many people do not take advantage of this free money.

For most people, the best investment is to have the fund coming out of your paycheck and have an allocation table to follow to ensure proper diversification. There are different allocation tables based on your age, and your target date for retirement. Younger you are the more you can take risk and as you get closer to retirement you slowly decreased risk: (not end all risk). The general rule is if you invest safe investment based on your age so if you are 30 you place 30% in safer or safer investment and place the 70% into higher risk investments such as stocks, mutual funds. That same idea is true if you are 60 years of age. Places 60% in safe investments and 40% in higher risk. You should adjustments for your personal risk tolerances.

11) What do you do with you 4% start of placing the money in bank or credit union account automatically from your paycheck to be placed into you’re saving account. Once your funds have reached a high enough amount, you can look at other options, like CD’s short-term, investment account under a money market, bonds (Government, & Corporate), treasury inflation protected securities (TIF’s’) conservative allocation investment accounts (mutual funds or EFT’s) for this type of saving avoid anything high risk. This is a short-term account, and you need low-risk investments. Do not forget to leave at least $500, to $1000 to pay for urgent situations in your bank or credit union account.

12) What is better for me pretax retirement (40lk/traditional IRA) or post-tax retirement Roth IRA/Roth 401k)? I recommend everyone to go pretax up to their match. If you go pretax after this or Roth is a personal choice based on your situation. Is it better to pay taxes now or later?

There is a feeling that we have very low taxes right now and it is better to take advantage of the Roth. There is another way of looking at this situation. I am going to pay taxes for the next 30 or 40 years without any benefit.

Now, I personally have pretax up to 10%, after that go with Roth. I believe that having 2 pots of money will hedge for what the future may bring. If may need to hire a CPA or Tax lawyer to help you find ways to reduce the taxes in the future.

Besides we do not know what the market will look like in the future. I personally believe we can take out the minimum amount out of a pre-taxed fund each year and paying the lowest tax bracket. Besides, the government can resend the Roth IRA/Roth 401k if it is not working out for their best interest.

12) You earn a 0% on equality, so why not take out a 30-year mortgage or 5-year car loan. Do not get a return on equality confused with inflation. Most people see their house values go up this is return on investment (ROI).

In-fact it may be due to inflation, not the equity working for you. You should put the difference in your retirement account. Like I said before you can make 12% on average on the stock market and only 0% on your equity. What is the point of paying it off mortgage faster?

Now if you have high debts over 12% interests you should pay these off sooner with your additional leveraged money. Plus, you still receive a tax break for mortgage interest and taxes. The same goes for a student loans. Why pay back a low interest loan off sooner? When can you make more as an investment? This is a concept the wealthy used called other people's money (OPM).

14) You should have a last will draw by a lawyer. A simple will can save part of your money going to the government, and costly court costs later.

15) One trick I received from Primerica: You shouldn’t hold back your payment to make one payment. For example, if pay bi-monthly (Paid once at the end of the month and paid on the 15^th of the month) rather make two smaller payments. Make a payment early and make the second on your next pay cycle. This will reduce your interest. Since most loan calculated on a daily interest you are best to pay loan or credit card debt off using each paycheck cycle, even if it one half of a payment at a time. This will work for credit cards, student loans, and car loans. It tends not to work for mortgages because most of the home loans are government backed and have a different system of calculation on the interest. Last note, to avoid some troubles later, check with your lenders to ensure that making a split payment will not cause issue (late fees), how your loan is proceeded. What is the first thing you will change in your Finances plan? Let us know place it the comments.

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