My 2014 Financial Plan

Sometimes I feel like a preacher who doesn’t believe in God.

Most people could make a decent financial and investment plan on their own (without a financial adviser) in about 20 minutes.  My plan for 2014 would look something like this:

1.  Spending Plan:  Know how much money comes in and how much money goes out month by month and make sure you don’t spend more than you make.  You can get more fancy on this step by tracking daily expenses or using a program like if you like, but you get the basic idea.

2.  Draft a Will and Advanced Medical Directives:  People often ask if they should use an online resource like for this or hire an attorney.  Without getting bogged down in details, I would say to do whichever you feel more comfortable with.  If you have a unique situation or a special needs child I would nudge you towards an attorney.  If you are young and temped to skip this step altogether, I would suggest LegalZoom.

2.  Emergency Savings:  Open an account seperate from your checking or regular bank savings account for your emergency cash reserve fund.  I make the accounts seperate from my regular accounts so it’s harder for me to raid it when I’m on a spending binge.  I like the FDIC insured Capital One or Sallie Mae accounts.  Aim to get $500 in that account before moving on to the next step.

3.  Get Your Full 401(k) Match:  If your employer matches retirement plan contributions, ask how much you need to contribute to get the full employer match.  It’s free money so don’t leave it behind!  

4.  Pay Off High Interest Debt:  Some would argue that this should come before step 3 above, and if you have strong feelings one way or the other I won’t argue.  Dave Ramsey wrote a good book on this topic called “The Total Money Makeover” but the basic idea is to stop digging the hole (spend less than you make) and then pay off those credit cards.

5.  Revisit Emergency Savings:  Now aim to get 3 to 6 months worth of expenses in that emergency savings account.  Save more if you have an unpredictable sales job, less if you are a tenured teacher and can’t imagine taking a pay cut or getting fired.

6.  Insure:  If you have dependents (young children or an aging parent you care for), figure out what they would need to survive without you.  Suzie Orman has a quick online calculator for this at:  For myself, I figured that I wanted the mortgage paid off for my wife and enough money to get the kids through college.  Like most advisers who don’t sell life insurance (and have a conflict of interest) I like term life insurance over all other types.

7.  Open An IRA:  Estimate how much more you should be saving for retirement with the AARP retirement calculator at:  After you get that 401(k) match from step 3 above, I would save for any additional retirement saving shortfall by opening up your own IRA directly with Vanguard, Fidelity or Schwab and putting monthly contributions in to it.  Invest in a good low-cost balanced index or target date retirement fund and call it a day.

8.  Save For College:   If this is a priority for you and you have kids, I would save for school.  Every dollar saved now saves you many more dollars of interest down the road so don’t think even $25/month is too little.  I live in Maryland and use the T. Rowe Price 529 College Savings Plan.  You could also use a Roth IRA or Educational Savings Account (ESA) if you like.

9.  Pay Off Other Debt:  Call me old fashioned but I hate owing people money.  At this point in my financial plan, I accelerated the amount I pay towards my car, my wife’s student loan, and then the mortgage.  My goal is to have the mortgage paid by the time the kids hit college age.

10.  Now Get Ahead:  Good job if you made it all the way to this last step!  My last task is to revisit that seperate emergency savings account I created in step 2 and added to in step 5, and then set up seperate (just for organizational reasons) FDIC insured accounts for other foreseeable expenses.  How about having a “Car Account” and directing money towards it each month.  What about a “Vacation Account”, “Holiday Account” or “Home Improvement Account”.  Keep all of these accounts in FDIC insured cash – Don’t get greedy.

Best of luck for 2014!