October is National Financial Planning Month! Use this month to celebrate the importance of financial planning and learn some tips and tricks on how to get your financial house in order.

Create a Spending Plan

To begin taking control of your finances, it's crucial to understand your spending, track expenses, and create a manageable monthly budget. While everyone’s spending plan will differ, the 50/30/20 rule offers a solid starting point.

The 50/30/20 rule suggests allocating 50% of your budget to essentials—such as rent, food, and utilities; 30% to discretionary expenses—like entertainment and travel; and 20% to savings, investments, or debt repayment.

Many useful apps are available to help maintain your budget, such as You Need a Budget (YNAB) or Honeydue for partner budgeting. Our financial planning software also includes an integrated budgeting app for our clients. Interested? Reach out.

Be Smart With Your Debt

Not all debt is created equal—debt isn't always a "bad" thing if used wisely. For instance, taking on a car loan and making timely payments can help you afford a vehicle without paying upfront and also improve your credit score. However, it's important to be cautious of high-interest debt, as it can lead to financial trouble quickly. With today's interest rates being higher than just a few years ago, credit card debt, variable-rate debt like HELOCs, and margin loans can become problematic if cash flow and expenses aren't closely monitored.

Understand Interest Rates

Understanding how interest rates impact your finances and debt is crucial. Depending on market conditions and your credit score, mortgage rates have recently been roughly 7%. In comparison, the average credit card interest rate as of May 2024 was nearly 23%. At such high rates, credit card debt can quickly accumulate, making it difficult to regain financial control.

Being informed about interest rates allows for more strategic financial decisions. Instead of paying cash for an asset like a house, securing a low-interest loan may allow you to invest that cash elsewhere for a potentially higher return than the interest cost. These decisions are best made with the guidance of a financial planner who can help you assess your options and make informed choices.

Get Covered by Insurance

Another thing you can do to celebrate Financial Planning Month is to ensure that you are properly covered with the right insurance. If you have dependents or people relying on your income, life insurance is a must-have. Life insurance can ensure that the people you love will be taken care of if something were to happen to you. Consider renters or homeowners insurance, car insurance, disability insurance, and health insurance to make sure you are transferring known risks that you can not cover on your own without insurance.

There are lots of things you can do to take control of your finances for National Financial Planning Month, and these are just a few. Questions about your personal or business finances and getting your financial house in order? Reach out.

1. https://www.investopedia.com/ask/answers/022916/what-502030-budget-rule.asp
2. https://www.bankrate.com/mortgages/historical-mortgage-rates/#tens
3. https://www.forbes.com/advisor/credit-cards/average-credit-card-interest-rate/
4. https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.