Financial Planning For Beginners: First Things First

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Financial Planning For Beginners: First Things First

What’s the first thing I should do to begin financial planning?  

My wife and I are expecting our first child, so I’m motivated to get serious about financial planning. My question is, where do I start? I already have a savings account and a 401(k) plan through my employer. Should I invest in the stock market? Set up a college fund? I want to make sure my spouse and child are protected and taken care of.

What I recommend is a little bit different than what you might hear from most financial planners. While investing in the market and setting up financial accounts is exciting, doing these things first won’t do the most to protect your family. Building a financial plan is like building a pyramid – you want to start with a strong base and go up from there. All families need a strong foundation that includes the establishment of three vital documents:

  • A will
  • An advance health care directive
  • A financial power of attorney

Let’s go through these financial documents one at a time and address what these documents do and why you need them. Once you have these three items checked off, then you can start thinking about the more exciting stuff, knowing you are building a strong financial plan from the ground up.

Everyone Needs To Have A Will:

This document tells the world who gets what should anything happen to you. Most importantly, it tells the world who you want to take care of your children should anything happen to both you and your spouse. This component is particularly important for young families; otherwise, the courts get involved.

As far as your financial assets go, a will alone does not ensure that monies are distributed as you wish. You want to make sure that the beneficiary forms on your 401(k) plan at work and any other life insurance policies and financial accounts list the correct beneficiaries.

It often happens that beneficiary designations aren’t updated when people get married, divorced or have children. The beneficiary designations on your financial accounts take precedence over what’s listed in the will, so be sure to check and make sure all your paperwork is up to date to reflect your current situation.

You Need To Have An Advance Care Directive:

This document has two components: a living will component and a health care power of attorney. These two things together work to protect your health care intentions should you become physically unable to communicate what you want.

First, you spell out what treatments you want or don’t want should you become terminally ill or unconscious.

Second, you name someone as your health care stand-in, giving them medical power of attorney to make medical decisions on your behalf. This is not just for end of life situations, but covers incidents where all factors must be weighed-in and a medical decision made on your behalf. The person you appoint will have the authority to uphold your wishes.

If you have any doubt as to the necessity of an advance care directive, take a moment to familiarize yourself with the Terry Schiavo story and you’ll likely find yourself extremely motivated.

You Need To Have A Financial Power of Attorney:

This last component is like the financial equivalent of a health care power of attorney. You name someone who is able to make financial decisions on your behalf should you be unable to do so. This document can save your family thousands in legal fees and court costs and you have control over what responsibilities your proxy can and cannot do.

Bottom Line: The foundation of a strong financial plan for your family begins with the creation of these three documents: a will, an advance care directive and financial power of attorney.

Do you have a question about where to start with your financial planning, success with money, your business, or life? You can ask Beau anything by visiting and sending your question(s) in to RichLife HQ! 


Helpful Links:

New York Daily News: Terry Schiavo Story

American Bar Association: Consumer’s Tool Kit for Health Care Advance Planning

Beau and his firm have been featured in:

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