A Bird’s Eye View of a Household Financial Plan (Part 2)
This is the second part of my blog about creating a financial plan for your household.
Education plan. The objective of this plan is to have a sufficient amount of fund during high school, college or perhaps graduate education of your children or members of your household. The amount to be earmarked on a regular basis is dependent on some factors like the type of school that you intend your children to go to, and the projected increases in tuition fees.
Retirement plan. From the desired level of lifestyle that you (and your spouse) want to have, you can set up a sinking fund fior it. This can be funded by regular contribution to this fund coupled with corresponding investment activities that aim to maximize the fund’s returns.
Estate plan. Planning your estate involves questions like: Are you going to donate real properties to your children even before you “kick the bucket” or just let them inherit these properties when you leave this world? In other words, what’s the cost-effective way of transferring wealth. This may involve making a (testamentary) will and consulting with a good tax lawyer.
Special needs plan. These take care of other needs such as a wedding, a vacation abroad with the whole family, buying a second house, setting up a fund for charity or foundation, etc. Just like the other concerns, these need preparation and planning.
A Financial Plan may not be as comprehensive as outlined above or it may not be in black and white at all. I strongly suggest, however, that if you decide to have one, you might as well do it properly by incorporating the above components. A Financial plan is nothing if you will delay its implementation. A good financial planner can help you a lot not only in the implementation itself but also later on when you review and monitor your plan.
Visit this blog again if you want to learn how the above components of a financial plan are being done.
Print This Post
While I agree that education is a very important financial goal, my opinion on whether to prioritize education over retirement depends on the individual’s situation. Ideally a person should starts building the educational fund first since that goal is likely to come sooner. But if its an absolute choice between funding for one and risking out-of-pocket financing for the other I would go for my retirement. Why? Because in my situation my kids will go to college during my peak income years so I will have a better chance of funding for the cost of education by simply adjusting my household exenses a bit. Retirement on the other hand, in my opinion, is a point of no return. Once the cashflow stops coming in, that’s it! If I need to work after retirement managing a small business or doing consultancy in order to survive (very different from those who do to these as a hobbies) then I guess I’m not retired. The last thing I want is to wake up one day on my 65th birtday and realize that I need to hurry because I’ll be late for work.
Nice list! I think that among these financial plans, the best and the priority should be the educational plan. When you already finished planning for your children’s future, then it will be all up to you. I believe for any married person that he/she lives for the purpose of his/her family.
After your children have finished their education, then it’s time for you to enjoy and relax thru a retirement fund. Have vacation trips abroad. Set time to ponder and thank God for all the blessings and graces…
I am thinking of my special needs financial plan here since I am still young and surely would be a long way to go among the abovementioned other financial plans, he he.But these four financial plans are the among top priorities of every person who wants to put their money into a productive game plan in the near future!
Any printer-friendly-version of your articles? I hope that the icon will soon be available in this blogsite. Thanks & more power!
Thanks for the complement Eric. More power!
Thanks Allen! It’s my pleasure.
I found your blog on MSN Search. Nice writing. I will check back to read more.
Eric Hundin
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor