Congratulations, Graduate… Time to Plan!
James P. Tomasovich, CIMA®, AAMS® XPYRIA Team Insights
Step 1: Identify Your Goals (What are you trying to accomplish?)
- Pay off student debt
- Save for retirement
- Build emergency fund
- Personal spending/savings goal(s)
Based on your details of each goal, focus appropriately, however, do no attempt to knock them off just one at a time. Be sure to identify the opportunity cost of overlooking one goal to fund/pay down another, making the best decisions for your hard-earned income. Where should you start?
Step 2: Establish Your Personal Balance Sheet (What is your financial net worth?)
- Assets (cash, investments, property, etc.)
- Liabilities (short- and long-term debt, with detail)
Determine if your assets are working hard for you to reach your goals. Are your liabilities in the best position for you to successfully pay them off? Are there opportunities to invest your savings to earn more, or refinance/consolidate debt to lower your overall interest paid?
Step 3: Organize Cash Flow (Where is your money going?)
- Track all income and outflows
- Categorize in detail
Break down your total cash flows coming in and going out. Record details on where all income comes from, and how outflows are spent. Detailed spending reports will help organize and recognize outflows and will help in discovering opportunities to optimize spending and savings habits. Average American outflows are divided as follows: taxes/health care (25%), fixed living expenses (25%), savings & debt payment (15%/10%), free cash flow (25%). How do your expenses look?
Step 4: Plan to Achieve Goals with Cash Flow (How can your money work best for you?)
- Automate cash flow to feed goals
- Create a budget and adjust appropriately
Customize your plan to reach your personal goals. Direct income to flow straight from your paycheck or bank account to the appropriate savings and debt payoff accounts. Take out the human elements of emotions and forgetfulness, to keep your plan on track. Monitor and adjust over time.
About the Author
James P. Tomasovich, CIMA®, AAMS®Senior Client Advisor
Mr. Tomasovich is a Senior Client Advisor at XPYRIA, and a member of the Firm’s Investment Committee. He has fiduciary responsibility in client relationships, requiring actions and recommendations to be based on the best interest of the client. Jim advocates for his clients in designing and maintaining cost effective financial strategies, reflecting the unique needs and objectives of each relationship.