While You’re Young, 4 Steps to Personal Financial Planning – Twin Cities

Not everyone needs a comprehensive retirement plan. Perhaps your financial situation is quite simple: you are in your 20s or 30s and have your first or second job. You don’t have a lot of credit card or college debt, but you may be trying to save up for a car or your first home. You can create a personal financial plan in four easy steps that will prepare you to pursue these goals.

These are portraits of Bruce Helmer and Peg Webb, financial advisers for Wealth Enhancement Group and business columnists for Pioneer Press.
Bruce Helmer and Peg Webb


Having good information about your finances is the foundation of a good personal financial plan. Here’s what you’ll need to determine your assets (what you own) and liabilities (what you owe):

• Investment account statements: taxable brokerage accounts, 401(k) and/or defined benefit pension, IRA, Roth IRA

• Your total indebtedness, such as school loans, auto/boat loans, insurance premiums, mortgages and home equity lines of credit, etc.

• Estimates of any expected future inheritance.

Next, you need to gather records showing your income and expenses for the past year or two:

• Your annual salary (W-2)

• Income from gig work if you are a contractor or gig worker (1099s)

• Certificates of deposit (CDs), interest on money market accounts, or savings bonds

• Taxable dividends

• Your credit card bank statement(s)

For expenses, you’ll need to create two lists: what you spend on non-discretionary items (such as groceries, utilities, health insurance, clothing, transportation, child support, annual debt payments on each of your loans, taxes, etc.) and what you spend on “fun” things (such as eating out, travel, entertainment, hobbies, charitable donations, etc.)


How much do you owe and how do you plan to pay it? Make sure you understand the interest rates you are paying and whether they are fixed or variable. Is any of that tax deductible?

Conventional wisdom says to pay off your largest loans first. That may make sense depending on your tax situation, the interest rate you’re paying, and whether the debt is building value.

Most people agree that you should also pay off your highest-rate debt as quickly as possible, especially now that interest rates are about to rise, according to the Federal Reserve.

Never simply pay the minimum balance on any credit card. You’ll find it difficult to get out of debt, and you’ll pay much more over time than you would have bought using cash. We’re big believers in using credit cards just for convenience, not because it gives you the ability to put off paying for something you want. Generally, we recommend customers have no more than one or two credit cards and pay them off in full each month.


Are you taking too much or too little risk with your investments? If you’re saving for a big purchase five years from now, like a house, you probably want to put your savings in conservative accounts, like a money market fund. On the other hand, if you’re saving for retirement, which could be 20 or 30 years from now, you may be able to take more risk in the form of holding more stock.

Over time, as you get closer to your retirement date (say, 10 years from now) and depending on your personal situation and risk tolerance, you’ll probably want to maintain some exposure to stocks, but gradually move into more conservative investments, like bonds. or cash. Stick to low-cost, highly rated funds that you understand and rebalance them about once a year around your target allocation (i.e. what percentage of stocks and bonds you prefer in your portfolio – this should be adjusted as your tolerance changes to risk). Rebalancing means selling your winning funds and investing the profits in your underperforming funds, so that you maintain the amount of overall portfolio risk that you feel comfortable taking.


Once you have a handle on your assets and liabilities, income and expenses, and how your retirement money is invested over the long term, you should be in good shape to create a working budget. Here are some guidelines to help you get started:

• Separate your wants from your needs. Reduce desires as much as possible.

• Create an emergency fund for six months of living expenses.

• Pay off credit cards with high interest rates and small balances.

• Get in the habit of saving a small amount each month and add to it over time.

• Don’t forget to include your retirement plan contributions as a budget line item.

This simplified four-step personal financial plan is a great way to gain perspective on becoming financially independent. If you need help getting organized, consider working with a financial advisor to help you create a comprehensive financial plan that takes into account the many sources and uses of your money, the performance of your investments, interest rates, and your future goals ( including how those goals might change over time). ).

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