Financial planning is the process of looking at your financial picture at a glance, and usually, a professional advises clients on how to achieve their goals. Sovereign CPA is Birmingham’s go-to for financial planning, estate planning, and much more. If you want to learn more, we’re the best place. Here, we will discuss when you should start financial planning and how to do so.
If you need assistance with financial planning or estate planning in Birmingham, contact Sovereign CPA online or call (205) 402-4245 today.
When to Start
When You Start Making Your Own Money
The first time you should start financial planning is once you start earning, regardless of age or income. Of course, there is nothing wrong with celebrating your first paycheck! But years down the road, you will be happy that you started on the right foot by planning ahead.
By taking up financial planning now, it is easier to spend wisely, stray from credit cards, and maintain healthy financial habits.
The Second Best Time to Start Is Now
If you have already started working, there is always time to look into financial planning. Even if you have made some mistakes along the way with spending or lack of saving, you can still make changes, even if you don’t know your best options. Any questions or concerns you have should be approached with well-structured financial planning offered by a professional at Sovereign CPA.
A Guide to Get You Started
Set Financial Goals
Before sorting out your plan, you must ask yourself the following:
- What kind of goals do I want to achieve?
- Why am I saving my hard-earned money?
- What is it that I want the most out of my money?
Having clear goals can make it much easier to maintain discipline, stay on top of finances, and manage to spend.
Create a Budget
Consider your budget a monthly cash flow and savings/investing plan. In simpler terms, set aside a number of earnings that is dedicated to paying bills and another number that you can spend on yourself. By doing this, you will know how much you can spend in a month. It could also be helpful to make a note of your spending every time you make a purchase so you know where your money is going.
Plan for Taxes
Planning for your taxes can help you get the most out of the following year’s tax return. You can always work with a financial advisor, who will provide a tax planning worksheet. These worksheets run through potential income tax credits and deductions. Paying your taxes can be tricky without guidance, so don’t hesitate to call on help from a professional!
Build Your Savings and Emergency Fund
You never know when an emergency could happen, so it is always a good time to start looking at how you can build a savings or emergency fund. When deciding how much to put into your savings, it is important to think about the following:
- How much money are you left with after paying the bills?
- How much can you comfortably put in?
- How much you make.
A good rule of thumb is to put some money into your savings biweekly or monthly, even if it’s just a small amount. After all, something is better than nothing! It is also essential to take into account estate planning. Contrary to popular belief, estate planning can be started at any point in life and should be started before the later years of your life. Estate planning is important, as it directs your belongings to specific individuals of your choosing. If you need assistance with estate planning, contact Sovereign CPA today.
Plan for Retirement
Even if it is a long way off, it never hurts to prepare for the future. When planning for retirement, it is important to think about what you want and need your money for when you stop working. After identifying these goals, you can proceed with creating a financial plan to make those goals happen, as well as begin estate planning.
Talk to Our Estate Planning Professionals in Birmingham
Here at Sovereign CPA, we firmly believe that financial planning is the first step toward success for both individuals and businesses. If you want to reach your goals and thrive, our Birmingham consultants are here to help. Contact us today or call (205) 402-4245 to learn more.
FAQs
The first time you should start financial planning is once you start earning, regardless of age or income. Of course, there is nothing wrong with celebrating your first paycheck! But years down the road, you will be happy that you started on the right foot by planning ahead.
At what age do you make your best financial decisions? ›
It found that the perfect age for making financial decisions hovers between 53 and 54. This is when workers tend to have gathered enough experience of spending and saving money but, crucially, have not started to lose key cognitive skills.
When should you start preparing a financial plan? ›
WHEN FINANCIAL PLANNING BECOMES CRITICAL
- Settling Down. A financial plan becomes even more important when you start to have bigger goals—such as saving to buy a house—or you get married and have kids and your life becomes more complicated. ...
- Career transitions. ...
- Near retirement. ...
- Enjoying retirement.
It is true that you generally need to be at least 18 years old to open your own brokerage account, but people younger than that have plenty of options to invest—although they require varying levels of supervision or collaboration with an adult.
How old is the average financial planner? ›
According to the report, the average age for an Australian adviser has dropped from 51 years old in 2021 to 49 years old in 2022, while the average salary has improved 7.4 per cent from $135,000 to $145,000 over the last 12 months.
Where should you be financially at 25? ›
By the time you're 25, you probably have accrued at least a few years in the workforce, so you may be starting to think seriously about saving money. But saving might still be a challenge if you're earning an entry-level salary or you have significant student loan debt. By age 25, you should have saved about $20,000.
Is 25 a good age to start saving? ›
Turning a quarter-century old can feel like a big milestone, but it's significant for a financial reason, too. Young adults need to start regularly saving by age 25 to have a least $1 million to retire on, according to a new report by the Milken Institute.
What are the 3 rules of financial planning? ›
Finance experts advise that individual finance planning should be guided by three principles: prioritizing, appraisal and restraint. Understanding these concepts is the key to putting your personal finances on track.
What is the rule of 20 in financial planning? ›
Do not subtract other amounts that may be withheld or automatically deducted, like health insurance or retirement contributions. Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
How to do financial planning for beginners? ›
Financial Planning for Beginners - Top 10 Golden Rules
- Manage Your Money. ...
- Regulate Your Expenses Wisely. ...
- Maintain A Personal Balance Sheet. ...
- Dealing With Surplus Cash Judiciously. ...
- Create Your Personal Investment Portfolio. ...
- Planning For Retirement. ...
- Manage Your Debt Wisely. ...
- Get Your Risks Covered.
Achieving retirement before 50 may seem unreachable, but it's entirely doable if you can save $1 million over your career. The keys to making this happen within a little more than two decades are a rigorous budget and a comprehensive retirement plan.
Is $20,000 a good amount of savings? ›
Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
What age is too late to start investing? ›
It's never too late to start investing and managing your money. But I don't want to sugarcoat it. If you're planning to invest for retirement, getting the ball rolling in your late 60s certainly limits your options. So, let's discuss some of your choices.
Are financial planners worth it? ›
A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.
Should I get a financial planner in my 20s? ›
Should I get a financial advisor in my 20s? Not every decision requires a financial advisor, but if you prefer to have someone to talk to about major financial decisions, or if you'd like someone to manage your assets, then an advisor may make sense for you.
Is it wise to have a financial planner? ›
Bottom line. While not everyone needs an ongoing relationship with a certified financial planner, pretty much everyone can benefit from having a consultation — and some initial input — with a CFP. Especially since there are a variety of concerns that a financial professional can assist with.
At what age do most become financially independent? ›
Among the key findings: 45% of young adults say they are completely financially independent from their parents. Among those in their early 30s, that share rises to 67%, compared with 44% of those ages 25 to 29 and 16% of those ages 18 to 24.
At what age is a person's financial capacity at its peak? ›
Your net worth tends to peak around your mid-to-late 60s — or typical retirement age.
What is the average financial position of a 30 year old? ›
Average net worth by age
| Age by decade | Average net worth | Median net worth |
|---|
| 20s | $99,272 | $6,980 |
| 30s | $277,788 | $34,691 |
| 40s | $713,796 | $126,881 |
| 50s | $1,310,775 | $292,085 |
4 more rowsWhether you're contemplating education, switching careers, or simply intrigued by the field of finance it's never too late to start this journey.
