Before you even think about a financial plan…

by Jacob Brown

You’re reading this blog post after three hours of sleep and two cups of coffee. One kid wouldn’t fall asleep until 11pm, then the other woke up with a wet diaper at 1am. This is on top of the cost of childcare, housing, groceries, student loans, and all the things that life can throw at you, it can feel like the walls are starting to close in.

My name is Jacob Brown; I am a Financial Advisor at Southwest Investment Advisors (SIA). I am married, have two toddlers, and live in Tucson, Arizona.  I want to tell you a little about financial planning from a place I know well, as a husband and father of a young family.

Lizz Manning defines Financial Planning as “…a document that details a person’s current financial circumstances, short- and long-term goals, and the strategies that can be used to achieve those goals…”

From the perspective of a young family, goals and strategies in a financial plan are crucial for pursuing a legacy for your family. However, building this plan means nothing if you can’t be on the same page with your partner about your vision for the future, financial goals, and what your priorities are.

Shared Vision

When we talk about shared vision at SIA, we mean being on the same page about what the future looks like. That’s beyond whatever phase of life you are currently in. It’s critical for partners to zoom out and take a 30,000-foot view of what their future life together looks like. Some examples are, where in the world do we want to put roots down? Do we want to have kids, where will the kids go to school? When do we want to retire, what will we do in retirement?

Shared Financial Goals

Now we throw a timeline at you. We need to be very clear with your partner about these timelines. As Peter Drucker said, “what gets measured gets improved”, so fast forward 5, 10, 15 years and daydream about what that looks like. Some examples would be, in 5 years when both kids have graduated high school, are we going to sell the house and hit the road in an RV? In 15 years, are we going to retire completely or just part time? In 20 years, are we going to buy a second home near where the kids are so we can be with grandbabies?

Emergency Fund

Once you and your partner are singing from the same sheet of music, it’s time to dig in and establish your emergency fund. Generally speaking, emergency funds consist of 3-6 months of living expenses, more if your job isn’t solid or is based on commissions. We always refer to your emergency fund as your “sleep at night” number. That can be 3-6 months, or even more. Ask yourselves, what is that number that just sits right in our gut?  So, throw everything you have at hitting that number, and park it in a high yield savings account (HYSA).

Define your Priorities

Now, we have established a shared vision, we are on the same page about our financial goals, and we have our emergency fund, what’s next? We leave this up to you. YOU need to define your priorities and decide your next move. Maybe you’re really debt averse, and want to pay off your mortgage or all of your student loans, maybe you want to save for a down payment on a house, maybe your kids’ education is your top priority and you want to fund an ESA or a 529 for them, maybe fully funding your retirement every year is a priority, or maybe you have all of those set already and you want to start investing in a personal investment account.

If you have your shared vision, goals, an established emergency fund, have defined priorities, and are ready to get started, I would be happy to help you with your financial plan.