First Person: Simplifying My Finances with a Financial Flowchart

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My only financial resolution for the New Year is to simplify my finances. I decided to use a financial planning flowchart published by Bloomberg to help me get back to the fundamentals. Even though I know the key to success is to spend less than I make, I sometimes get distracted on my path to financial security. For my family, some of the key financial goals include completing our application to refinance our home and saving for retirement.

Spending within our budget

Our first step in financial planning for the New Year was to take a look at whether we are living within our means. My answer is that we sometimes spending within our budget. My first goal in the New Year will be to pay off the credit card balance for January and then beef up our savings.

Living off our savings

My next step was to figure out if my husband and I could live off our savings if one of us lost our job. Our answer to that question is that we would be "fine for a while." In addition to boosting our emergency savings account, we are planning to max our Roth IRA accounts. My company doesn't match my 401(k) contributions so I'm putting those contributions on the backburner.

Figuring out asset allocation

Because I am now 40, I may need to change my asset allocations so that I have the right percentage of money spread between cash, stocks and bonds. I'm going to lean toward more aggressive positions for at least another 5 years. Still, I think I can simplify my finances in the New Year by picking exchange traded funds or ETFS that include growth stocks. Because they are funds, I won't feel tempted to buy and trade them. Also, I am going to stick with ETFS that pay dividends.

Considering my home an investment

Although financial experts say homes today are more of a place to live rather than an investment, I only somewhat agree. I think that while I'm alive my home will serve as a place to live, but when I die my mortgage will be paid off. I feel as though I'll be leaving a nice inheritance for my descendents. We are in the process of refinancing to a 2.75 percent interest rate so we can pay off our home within the next 15 years. I feel as though refinancing at such a low interest rate is another way of simplifying our finances. Even if we just pay the minimum payment of $900 a month, we will be mortgage free by the time I am 55 years old.

Every New Year comes with new financial challenges. We may face unforeseen financial expenses. By sticking to a weekly budget, we are confident we can weather any financial storm. Using a financial planning flowchart helped me to better visualize my challenge areas and remind me of every angle I need to cover.

More from this contributor:

A Backup Plan for an Involuntary Early Retirement

Working Harder Should Make Me Rich

Playing Catch-Up with My Retirement


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