Financial planning is more than simply throwing money in a savings bond or employee pension plan for a rainy day. With the unpredictable economy, it’s more important than ever to face the prospect of potentially running out of money too early. Yes, the financial challenges of retirement have become this serious — and for several reasons:

  • The life expectancy rate in America keeps increasing
  • Government and corporate benefits keep declining
  • Savings accounts fail to keep up with the times
  • Investment accounts fail to meet expectations
  • People tend to overspend in their personal lives

These reasons truly illustrate why engaging in careful financial planning is more important than ever. Especially if you want to be able to live comfortably for the rest of your life.


What Does Financial Planning Include?

Careful professional planning includes three key steps: intelligent budgeting, continuous savings, and spending less than you make. These three steps are the backbone of any financial plan. The rules help implement the financial plan and maintain them long-term.


  1. Budgeting

Budgeting is the core of any financial plan. You cannot save money if you cannot track it correctly. And therein lies the purpose of a budget — to meticulously track and manage your incoming and outgoing money. The thing you keep in mind, though, is that budgeting your money doesn’t have to be a tedious chore. It involves simply sitting down now and again to figure out exactly where your money is going.

Below are some questions to ask while budgeting:

  • How much are you spending on rent and bills?
  • How much are you spending on food?
  • How much are you spending on entertainment?
  • How much are you spending on transportation?
  • How much are you spending on club/gym memberships?
  • Are you spending any money on impulse purchases?
  • How much are you putting into your savings?
  • How much are you re-investing?


  1. Savings

Try to look at saving money as paying off a bill. Make it a mission to always save a set amount of money ($100, $200, $250, etc.) monthly, without fault. This might mean spending less on personal luxuries right now, but it also means having more money to back you up in case of an emergency. Your best bet is to implement an automatic savings plan through your employer. You can also set up a ‘save-as-you-go” bank account that accumulates small amounts of savings as you make debit purchases.


  1. Spending Less

You will never catch up spending more than you make. This usually means borrowing money from credit cards and/or loans, which also means paying interest. If you keep doing this, it becomes much harder to permanently climb out of the hole and find financial security. If you must borrow money, pay much more than the minimum payment each month. Creating a list of monthly purchases and narrowing down non-essential items can help significantly. You can spend less by watching extra spending and finding discounts wherever you can.


Steps to Making a Financial Plan

There are six fundamental steps to making a financial plan and the first step might perhaps be the most important. Without a snapshot of your finances, it is difficult to plan for the future.

  1.  Assessing Finances- This is a fundamental step. It provides you with a snapshot of your current financial situation and should at least include the following:
    • Your income
    • Your net worth
    • Your incoming/outgoing cash flow
    • Your insurance policies
    • Your tax returns
    • Your retirement plans
    • Your employee benefits
    • Your investment portfolios

    It should also include an estimate of your retirement income, which will greatly differ from your current income. It’s usually significantly less, though it will receive some padding from Social Security benefits.

  2. Identifying Goals- This process involves utilizing your values, attitudes, and responsibilities to shape the future you desire. You’ll want to estimate your life expectancy and pinpoint the type of lifestyle you want to live. Do you want to be able to eat out everyday? Do you anticipate any illness developing or worsening? Are you looking to go on frequent vacations? Where are you planning to live? Do you think you’ll need to take up residence at a nursing home in your later years?
  3. Hiring a Professional- It’s at this point you need to start reaching out to professional financial planners. A financial planner is trained to assist you in assessing your financial situation; they devise an optimal plan that can meet all your needs. Unfortunately, there happen to be dozens of different types of financial planners. We recommend a Certified Personal Planner for general finance, a Chartered Financial Analysts (CFA) for investing, and a Chartered Life Underwriter for estate planning.
  4. Designing a Plan– After you assess your finances, define goals, and speak with a planner, you can then begin designing the plan. You’ll work alongside the planner to structure a plan that meets all your financial needs and stays within the confines of your budget.
  5. Executing the Plan– A financial plan is useless unless executed properly. The good news is that the financial planner you choose will be by your side to help coordinate your efforts. It will be up to you, though, to maintain discipline and stick to the plan!
  6. Reviewing and Refining the Plan– The last step entails simply reviewing and refining your plan every now and again to ensure it still coincides with your financial situation and allows you to meet your goals.


Post-Retirement Financial Planning

Financial planning certainly doesn’t stop after retirement, though it might grow a tad more complicated at first. Here are some common issues that retired seniors should remain aware of:

  • Changes in Medicare- Medicare is constantly changing. New health plans and forms of coverage are added, while others are removed. Healthcare consumes a large portion of retiree budgets, so we recommend keeping a record of your Medicare plans and speaking with advisors occasionally to determine if there are any new rules that could help you save money.
  • Medicare Surtax- As of 2013, married seniors with $250,000 in modified adjusted gross income must contend with a 3.8% Medicare surtax on their investments. Suppose you sell your home, and the proceeds from it raise your income over $250,000. That extra income would face the Medicare surtax. Note that this income also includes money from pensions, retirement plans, 401(k) plans, and more.
  • Medical Needs- Unfortunately, these expenses are inevitable in old age, therefore, retired seniors must plan in advance for medical expenses. You might suffer an injury, develop a chronic condition, or require residential care, such as assisted living. Such possibilities must be considered and funded (at least in part) in advance for your own financial safety and security.
  • Social Security- Try to refrain from collecting Social Security for as long as possible. There are penalties for collecting before a certain age and the longer you wait, the more you’ll receive monthly. If your investments are still strong when you first retire, considering postponing Social Security benefits for a couple years. You can use the Social Security Benefits Calculator on the AARP website if you would like to make more detailed calculations.


Never Stop Planning

Never stop financial planning. If anything, start as early as possible. We truly feel for those individuals who wait until their 60s to start planning. It must start as early as possible. Ideally, in fact, everybody should start planning their finances at ages as young as 20 and 30.

If you haven’t already begun setting up a sustainable budget and planning your estate, then you need to start here and now before you run out of time. Why put your future and possibly life in jeopardy when you can nip it in the bud now and set yourself up for a comfortable retirement?


For additional health information, visit the main Health and Conditions page or learn more about senior care options on the main Assisted Living page.

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About the Author: John Winfrey Jr. received his Bachelor’s in 2015 from the University of North Texas after spending much of his 20’s traveling across the country. Majoring in Marketing and minoring in Journalism gave him the experience needed to write and research important topics like senior health. Senior health especially hits home as his veteran father was a senior who eventually became deaf and blind. John had to become as familiar as he could, quickly, to provide support for his father.