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Thayer Partners Blog

A 3-Step Roadmap to Financial Security

[fa icon="calendar"] Aug 17, 2015 1:54:00 PM / by Chris Wilmerding

Chris Wilmerding

Events such as the death of a spouse, serious illness, and divorce are constants that cause upheaval in millions of lives every day.

The cruel irony is that all too often, these unpleasant experiences cause a kind of double whammy. People suffer through the angst, anger, loss, and many other emotions to the point of exhaustion only to encounter a whole new set of difficulties in their personal finances as a result.

Financial_PlanningWhy? Financial tasks such as managing budgets, incomes, and investments are often handled by one spouse, leaving the other spouse unprepared to take over these responsibilities if something happens.

Just in case that something happens, here is a simplified, 3-step roadmap to help you find your way back to financial security:

1: Know What You Spend Every Month

Many American households do not have a budget, and some have little or no idea what they spend each month. Tracking what you spend each month is a healthy way to understand “where it all goes” and often causes people to change their spending habits.

Using a financial software program such as Quicken will likely give you a deeper understanding of your spending habits. By itemizing your expenses, you can separate necessary and unnecessary expenses, allowing you to trim the fat from your monthly spending.

As a rule of thumb, tracking what you spend for six to 12 months usually gives you enough information to set up a pretty reliable budget.

2: Know Your Income Sources

Whether you are retired, working part- or full-time, or are receiving payments from an ex, you need to know your sources of income and how much each one will reasonably produce after tax year after year.

Once again, using a financial software program can be a huge help in tracking your various sources of income. Tracking when you receive income and when specific bills or other fixed expenses come due is a key part of creating a plan for reaching financial stability.

Furthermore, you can use this information to help you match your budget to your income, which is fundamental to your financial well-being.

3: Develop a Plan

Yogi Berra once said: “If you don’t know where you are going, you’ll end up someplace else.” This is especially true in personal finance. How can you create a financial plan? Consider starting by asking yourself some of the following questions:

  • Do you have a rainy day fund for unexpected expenses?
  • Can you generate enough income to lead a comfortable and secure retirement, or will you run out of money when you retire?
  • How do you plan to manage the rising cost of health care as you get older?

As you create your personal finance plan, finding answers to these and other key questions can be helpful.

While this roadmap would probably be helpful to most American families, it is especially important for those who have gone through a significant transition. The reward for matching your income with your expenses and building a financial plan is, renewed optimism, and increased confidence. Helping clients reach this state of happiness and confidence is one of the most rewarding parts of my job.

For more information about how to avoid running out of money in retirement, check out the free guide at the link below:

Avoid Running Out Of Money At Retirement

Chris Wilmerding

Written by Chris Wilmerding

Chris Wilmerding is Principal of Thayer Partners, an independent investment management firm located in Westwood, MA providing financial planning and wealth management counsel to individuals and their families.

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