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 using a financial advisor? ›
Experts say it makes sense to hire a financial advisor in the following circ*mstances: You don't have the time or inclination to manage your finances. You experience a major life event, such as a marriage, divorce, loss of a spouse, birth of a child, relocation or change in your employment status.
Where should a 25 year old be financially? ›
20k is the ideal savings amount for a 25 year old
According to Ryze, this amount is achievable for young adults save a minimum of 15% of the average annual salary of early 20s workers in the U.S. “The median salary for this age group is around $38,500 per year.” Ryze says.
Should I get a financial planner in my 20s? ›
Your twenties are the best time to establish healthy financial habits and start planning for the future, whether it's putting aside money for retirement or buying a life insurance policy.
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. The reason: the simple effect of compounding returns.
At what age are you financially secure? ›
If you start early enough—say, in your 20s—and follow the steps listed above, you may become financially secure by the time you reach your 30s. If you're older, all isn't lost. You can still reach your financial goals as long as you have a plan and adhere to it.
At what income is a financial advisor worth it? ›
Depending on the net worth advisor you choose, you generally should consider hiring an advisor when you have between $50,000 - $1,000,000, but most prefer to start working with clients when they have between $100,000 - $500,000 in liquid assets.
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.
What is the average age to get a financial advisor? ›
Data through the first three quarters of 2023 suggest the average age of an investor using a dedicated advisor had dropped slightly—to 57.7—according to J.D. Power. Clients who are over age 50 represent about three-quarters of advisory clients, and they hold more than 80% of the advised assets, according to Fidelity.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Is saving $1000 a month good? ›
Saving $1,000 per month can be a good sign, as it means you're setting aside money for emergencies and long-term goals. However, if you're ignoring high-interest debt to meet your savings goals, you might want to switch gears and focus on paying off debt first.
Is 30k in savings good 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.
At what net worth should you get a financial planner? ›
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
What are the disadvantages of a financial planner? ›
Cons of Working with a Financial Advisor:
- Cost: One of the biggest disadvantages of working with a financial advisor is the cost. ...
- Conflicts of interest: Some financial advisors may have conflicts of interest, such as receiving commissions for selling certain products or services.
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.
At what age are most people financially stable? ›
That said, the typical age of financial independence should be between 20-23 years old, according to a Bankrate survey.
At what age should you start considering your financial situation? ›
One key short-term goal to plan for is the need for an emergency fund. According to Bankrate, your emergency fund should equal three to six months of bills. CNN Money suggests that you start saving for long-term retirement goals in your 20s, as soon as you leave school.
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.
Where should I be financially by age 30? ›
By 30, you should have a decent chunk of change saved for your future self, experts say — in fact, ideally your account would look like a year's worth of salary, according to Boston-based investment firm Fidelity Investments, so if you make $50,000 a year, you'd have $50,000 saved already.
