Your Personal Financial Plan

Having and using a personal financial plan is absolutely necessary if you truly desire financial independence and early retirement.

Unless, of course, you're hoping on a star that you win the lottery.

Remember, if you fail to plan, you plan to fail.

There's really no way around it.

However, if you plan it all out and get started, you'll thank yourself someday when you start seeing the wonderful results of accumulated assets that pay for your easy living during retirement.

I know, I know, this website's overall theme is early retirement. However, you should still have a long-term plan set up just in case.

You may want to consider talking with a licensed financial planner for this type of planning. This person should ask you how much money you'd like to live on during retirement each month and then show you exactly how much you'd need to have accumulated in order to do so.

He or she should show you a spreadsheet that shows how much you need to start saving each month in order to reach your goal. The amount you need to have accumulated is usually called a "financial independence number", by the way.

Can you see why more than 90% of the people never retire in style? It's because they never determine their financial independence number and then act on that information.

You should be different and actually do what they refuse to do.

The plan that your financial planner creates should also provide you a plan to eliminate your debt.

Your future financial abundance depends on your ability to pay off your consumer debt and then your ability to stay out of debt. Don't gloss over this point.

Many people get flaky when life insurance is discussed. They resist the idea of paying for something that they won't benefit from directly. However, if you have a family, it's imperative you insure yourself as you all work toward retirement.

Just think, if you die without the proper coverage, your family's hope of retiring at all, let alone early, are gone if you were the main bread winner.

Income replacement is what life insurance is all about. If your family needs your income while you're alive, what in the world makes you think they won't need it if you're dead? I never could and still can't understand why some people don't grasp this concept.

Since term life insurance is cheaper per thousand than whole life or variable life insurance, term is the way to go here. Multiply your annual income by ten and you'll be pretty close to how much term insurance you need on yourself.

It shouldn't matter what it costs to place this life insurance on yourself and your spouse. Get rid of Showtime if you must and do the right thing for your spouse and kids. No excuses on this one! Don't be a weeny here.

Be very careful here. If you're like most people, you probably carry the minimum amount of auto insurance required by the law. If you do, you have a big hole in your financial plan. If you only think of the damages to the vehicle or the liability your state requires of you, you're forgetting about something.

What happens if you got into an accident and severely hurt someone (or worse)? What happens if they or their family decides to sue you for the big bucks and they come after your assets you've spent so long accumulating? What happens if you don't have enough coverage to handle the suit? That's right, you're in big trouble.

Seriously consider raising your auto insurance coverage to much higher levels to make sure you're properly covered. Your financial planner should be able to advise the correct amounts based on the amount of your current assets.

This is vital as you're working to make early retirement a reality. Be sure to find a quality health insurance plan and get yourself, spouse, and kids covered. Too many people underestimate the long-term financial damage done from an unexpected, yet drawn out medical condition.

If your employer offers a plan, get involved with it. If not, make sure you find an independent plan. The National Association for the Self-Employed may be able to help you if you can't get covered at work or are self employed. Just Google NASE.

At the very least, you should consider setting up your will, living will, and find a good attorney to represent you in the event you ever need the help. We live in a litigious society and their is always someone out there who's happy to separate you from your assets if they can.

You may want to consider investing $25 a month into Pre Paid Legal's service. Do a Google search on them and see all the benefits you receive as a member.

If you're having trouble finding the money to invest long-term, buy life insurance, or pay down your debt with, then you really need to put a budget together. Find out exactly where your money is going and figure out how to shore up any ways where you're just letting money slip through your fingers.

An emergency is so vitally important. You really should work hard to accumulate a short term account that could "float" you for three to six months in the event of an emergency. Additionally, what are you going to do when you work hard to become debt free and then the refrigerator or car breaks down? Most people break out the credit cards again.

However, if you do what most people won't and build up that reserve amount, you can now handle any emergency that comes along and do so with cash. What a difference that makes in your life.

Follow the above steps as you work on your early retirement plan. Think long term as well as short term. Don't take anything for granted. Protect yourself, invest, become debt free and do it all the intelligent way...use a personal financial plan.