Financial Planning in 2020: Focus on the Essentials

 In Financial Planning, Insurance Advice, Tips

These 2020 tips are still relevant today! However, if you’re looking for more detailed information about 2021 and the three pillars of financial planning, read our blog welcoming a new financial strategy in 2021.

With all the chaos in the world, many of us don’t know what to do or where to turn.

How smooth is the roadmap you’ve paved for your loved ones? The Resource Center is here to help you put the focus into 2020.

That means focus on the essentials. A back-to-basics approach lets you move forward with confidence, even when you can’t control everything going on around you.


Understand Your Current Financial Health

Just as weight and blood pressure tell you about your physical health, other numbers tell you how you’re doing financially. That makes it easier to set goals for the future.

  • Net worth. This is the value of assets minus liabilities. Assets include bank accounts, retirement funds and real estate. Liabilities include outstanding debts, such as mortgages, student loans and credit card balances.1
  • Savings rate. A good rule of thumb is to save at least 20% of your income each month, and more if you can afford it. Look closely at monthly expenses to determine how much you can save.1
  • Debt-to-income ratio. Calculate your monthly debt payments as a percentage of gross income. Most lenders like to see no more than 30%, and 20% is even better. If your current ratio is 40% of higher, getting debt under control will be a priority.2
  • Housing costs. Another best practice is to spend no more than 30% of your income on housing. Determine how much space you really need, and look for the most affordable housing available.2
  • Credit score. This is a measure of creditworthiness as calculated by the credit reporting agencies. Your credit score determines whether you qualify for a loan and your interest rate.1
  • Retirement fund. This includes 401(k)s, IRAs and similar accounts. Consider your likely retirement age, along with how much you’ll need to maintain your current quality of life.1
  • Income. While income isn’t the only measure of financial health, it does make a difference. Ideally, you want it to grow 3-5% per year. Look for promotion opportunities, or consider a “side hustle” for extra income.1


Spend Wisely & Know Where Your Money Is Going

Good financial habits include striking the right balance between meeting long-term goals and covering day-to-day expenses in the here and now.

  • Spend less than you earn. If your debt is rising, or your checking account balance is decreasing, it means you’re overspending.1 Always pay for necessities first, then look for opportunities to cut non-essentials. When you go shopping, look for quality used items and discounts.4
  • Build your emergency fund. Ideally, you want enough to cover six months of living expenses without having to get a loan or make withdrawals from your retirement accounts.5
  • Keep debt under control. Too much debt makes it harder to save for the future.5 There are different approaches for paying it off. With the “avalanche” method, you pay off the largest debt first, while the “snowball” method means starting with the smallest debts.3
  • Invest for the long term. If you have any big-ticket expenses on the horizon, such as college tuition or a new car, set aside money for these.5 By the way, if you get a raise at work, save or invest that extra income to avoid “lifestyle creep”.3
  • Carry insurance. Along with your emergency fund, insurance means you’re prepared for the unexpected. Make sure you have sufficient health, home, auto and life coverage, and review your policies at least once a year and as your needs change.5


Get Your Affairs in Order with Estate Planning

For many people, estate planning is an unpleasant topic that’s easy to put off. Here are a few great reasons to make this year the time you create a customized estate plan.

  • Avoid probate. If you die without an estate plan, the court decides who gets your assets. This is often an expensive, time-consuming and emotionally fraught experience for loved ones. An estate plan can spare them this hassle.6
  • Avoid unnecessary conflict. If you haven’t spelled out who gets what, family members may engage in hurtful fights over your assets. Naming beneficiaries lets you avoid this problem.3
  • Reduce or avoid taxes. Estate planning helps your heirs avoid unnecessary taxes. Potential options may include AB trusts7 or ABC trusts.8
  • Help protect beneficiaries with special needs. If you have minor children, you can appoint a guardian to oversee their affairs until they reach adulthood. You can also provide for vulnerable adult beneficiaries, such as those with disabilities.6
  • Help protect your assets. Look for ways to shield beneficiaries from creditors or lawsuits against your estate. Options include designating asset ownership, insurance, limited liability entities, irrevocable trusts and asset protection trusts.9
  • Help protect yourself. Durable power of attorney designates a trusted individual to handle finances and other matters if you’re incapacitated. A living will ensures that your health care and end-of-life wishes are honored if you are unable to speak for yourself.9


Focus on Relationships

Digital devices can interfere with face-to-face interactions, a phenomenon researchers have dubbed “technoference”.10 More time on social media may also lead to less emotional well-being and lower quality relationships.11

Setting the phone aside allows for meaningful conversations about many important topics, including financial matters. Money is one of the leading sources of stress for many Americans, and lots of folks are uncomfortable talking about it with family.12 The reality is that open, honest financial discussions can benefit young and old alike.

There are many age-appropriate ways to teach children about money so they can make wise decisions later in life.13

  • At the store.13 Point out the prices of the items you buy and how you pay for them.
  • Budgeting. Explain to your kids how setting a budget helps us make smart choices with money. Show them the difference between needs and wants.14
  • Saving money. Let your kids know when you’re setting aside money for a big expense13, such as a house, car or their college tuition. 
  • Practice, practice, practice. An allowance is an excellent way for children to learn by doing. Once they have $100 or more in that piggy bank, take them to the real bank to open their first savings account. It’s also okay to let them buy something with allowance money from time to time.14
  • Future planning. Once your kids are mature enough, talk to them about your estate plan and long-term care arrangements. Reassure them that if something happens to you, they will be taken care of.13

It’s also a good idea to check in with aging parents regularly to make sure their financial needs are secured.

  • Find out if bills are getting paid on time and they’re having trouble covering expenses.13
  • Make sure they have sufficient insurance in case of a health crisis.13
  • Ask if they have an estate plan in place. Talk to them about building a plan that reflects their wishes and values, and address issues like power of attorney and living wills.
  • Respect their independence. Many older people worry about losing autonomy over their own decision-making. While it’s okay to help your parents with financial matters when needed, avoid making decisions that they are capable of making for themselves.14 

In times of uncertainty, you need to focus. That means setting the right priorities and knowing the steps you need to take to meet your goals.

At The Resource Center, we’re here to clarify your focus on the essentials. Focus on the facts. Focus on your finances. Focus on your families. Focus on YOU. If you’re ready to focus on what matters most to you, contact us today.


Interested in Learning More About Financial Planning?

At The Resource Center, we’re dedicated to helping individuals and families with their financial needs. Our purpose is to provide the tools you need to help enhance your financial wellbeing and help secure your future. With our financial planning services, our team will help develop a plan that diversifies your assets, is consistent with your level of risk tolerance and allows you to maintain your current lifestyle.

















Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center are not affiliated companies. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. Investing involves risk, including the potential loss of principal. Investing involves risk, including the potential loss of principal. Any references to protection benefits generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.  #00482080

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