A Financial Planning Month Special: Importance of Financial Planning

Jessica Quindlen: [00:00:00] Welcome back to the Sound Cents Podcast. I'm Jessica Quindlen. October is financial planning month. So, I wanted to get a couple of people together to discuss getting financially fit and celebrating this awesome month. I have with us, Emma Protsik, our Financial Coaching Supervisor. Hi, Emma. How are you?

Emma Protsik: Doing great, Jess. How about yourself?

Jessica Quindlen: I'm great. Thank you. And Laura Straub, our Community Education Lead. How are you, Laura?

Laura Straub: Doing good.

Jessica Quindlen: All right. So, let's dive right in. How does financial planning contribute to financial well-being and long-term security?

Emma Protsik: Yeah. Financial planning encompasses a lot of different things. It really is an ongoing process. Financial planning can help for short-term goals. Things like budgeting or being prepared for an emergency, creating an emergency savings. It also incorporates those long-term goals. So, thinking about where you want to be and how you're going to get there.

Jessica Quindlen: I love that. All right. So, Laura, we have short-term financial goals and long-term financial goals. Can you sort of discuss the difference between these two?

Laura Straub: Yeah, [00:01:00] absolutely. Short-term is those one to two years about, and they're specific and more immediate. A car down payment, for instance, or that emergency fund that Emma was talking about. It can also be paying off a small personal loan.

Whereas our long-term is beyond that three-year mark. A little bit broader and more of those major life objectives. It could be retirement, buying a home, having financial independence. For some folks, it could even be a wedding. That could go under short or long-term, depending on your timeline for that.

Really, the big difference is just that time boundness of it. Short-term is a little bit less than two years. Long-term, you're looking at over three years.

Jessica Quindlen: Love it. All right, so I'm a bouncing back to you. How can individuals set smart financial goals? And when I say smart I'm saying specific, measurable, achievable, relevant, and time bound.

Emma Protsik: Absolutely. That is definitely my [00:02:00] favorite way to tackle different goals that we have. We’ll break it down kind of by each of those little letters in the acronym.

As far as being specific, this is where we're clearly defining our goals. I'm sure any one of you listening right now can just think of a financial goal that you have, right? You want to buy a home maybe. But that's not super specific. That's not really going to help you get in that financial planning space, to set yourself up for success there.

What you want to do with the specifics, an example for that, so if you want to purchase a home, great. Maybe you want to purchase a home for $300,000. You've done that research. You are getting all the good information to make sure that goal is truly defined.

And then when we're looking at measurable, this is the way that we can break down those different financial goals. A great example to make a goal measurable is committing to save a certain amount each month towards a specific goal. So maybe for a house example, I'm going to put $200 aside every single month. That's how I know I'm going to measure my progress throughout it is if I'm achieving [00:03:00] those monthly goals.

And then A is for achievable. This is just making sure you're being realistic with what you're trying to do so it makes sense with your current situation.

Relevant. This is making sure that it's aligning with your values and the objectives that you're having. You’ll want to make sure it makes sense in your life. And again, that future life that you're envisioning for yourself.

And then Laura talked a lot about it, but that time boundness is so very important. Again, it’s really great to set goals, just envision them, but sitting down, doing that planning piece is what's going to make sure you can achieve those things. It is mapping out the path you are going to take to get to your final destination.

Laura Straub: Yeah. And Emma taught me this too, with putting it on your checking and savings account. So, you're labeling your savings account a home by 2025 or whatever the timeline it is. Because you're building that emotional connection to your time bound goal too, so I love that tip. It's helped me so much. Thank you, Emma, for teaching me about [00:04:00] that.

Emma Protsik: Oh, best way to get that emotional connection.

Jessica Quindlen: I love it. So, Laura, why is investing an important aspect in long-term financial planning and what are some options to consider?

Laura Straub: Yeah. Investing is just a different way that we can start to kind of look at our future and our long-term goals.

Now with investing, we always want to take into account the risk level that you're willing to have with investing. So, talking with a financial advisor from the get-go is going to be so helpful for you to determine what is your risk level tolerance. And then they can help you a lot with setting up these accounts and so forth. But with investments we're talking about like building some wealth accumulation so you can do it through the stocks, bonds, et cetera.

You’re building up that wealth. Retirement accounts are a big one when people think about investment options to consider. So, making sure you're capitalizing on, if you're working for an institution that offers a [00:05:00] 401(k) or 403(b) with a match that you're taking advantage of that. So, definitely checking that out, making sure again that you're taking advantage of any employer benefits that you have when it comes to any investment options.

And then a lot of the times with investing, you can kind of beat inflation a little bit, depending on how fast inflation rate is going versus expected returns. It can just kind of vary on that. But again, you're looking at stocks, bonds, mutual funds, real estate can even be in there and then CD.

Certificates of deposits are a little bit less risky but less potential return, of course, because you're putting in a CD rate, but you know how much rate you're going to get at the end of it. You're going to get your principal back, things like that. So, CDs can be a great way to kind of do some smaller, long-term goal savings because they give you that time frame from the beginning. You're going into a six month at CD Or 18 months or whatever that may be. [00:06:00] So a great easy option to just get started when it comes to kind of starting to do some long-term investment savings.

Emma Protsik: That's great. I think investing piques a lot of individual's interest and there's a lot that goes into it. It can be crazy complex. So really good to look at all the different options you have, check with your financial institution. Most of them will offer a free consultation to sit down with a financial advisor, of course, Ent included.

Laura Straub: Yeah. Great opportunity to get some resources, Emma.

Jessica Quindlen: That's awesome. Now kind of looking at life stages. Of course, everyone is different, we all experience things, but relatively there are life stages where certain things are happening. Can we break down the challenges and opportunities for each life stage when it comes to financial planning?

Emma Protsik: Let's start with the younger adults. So maybe just starting off in careers, just figuring out what exactly you want to do. Some challenges they might be facing, of course, is that limited experience. As far as income goes, you can make more income the more experience you get.

[00:07:00] So it might be a little limited on that side of things. This also goes into other stages of life as well, but student loans is a big thing that they might be experiencing, having to start making those payments that they weren't used to making prior.

Another challenge they might face is trying to establish credit, getting their score into a good spot. But some opportunities they have a big part about investing. I know we all hear is that compound interest.

So they have maybe a little bit more time to start making those investments. Always recommend the soonest that you can start making investments putting money towards your retirement, your different goals, the better.

Laura Straub: Yes, please. Please do that. And then when you're looking at your early career. So continuing that, so building your credit even up more, you're starting to manage your increase expenses as well.

And you're kind of having this balance between short-term and long-term goals when you're in your early career. Managing that can be a little bit stressful. But on the bright side, you do [00:08:00] kind of have both of those. You have that nice, reward with those short-term goals that you're accomplishing.

Jessica Quindlen: Awesome. So then, we've gotten through our young, young adulthood, our early career where we're still young, and what happens when we kind of move into the next phase of our career?

Emma Protsik: So those folks finding themselves in the middle of their career journey, they might be finding themselves in what's known as the sandwich generation phase. You might have some children of your own that you're financially responsible for, taking care of your parents who might also be aging or, your guardians at the same time that might require a little bit more time or maybe even some financial assistance from you as well.

There is a couple different things that might be happening for these individuals, but for that mid-career level maybe it's just managing debt overall, trying to get everything paid down just getting ready for that retirement phase.

This is also the time that you might be kicking it into gear to make sure your retirement is getting a good amount of contributions. You're [00:09:00] getting those balances up high enough for when you are ready to enter that stage of your life.

Laura Straub: Yeah, and then that pre-retirement timeframe, so right before you're about to retire, making sure you're having those decisions about health care. Seeing what that's going to be looking like for you, and then determining when you are going to retire too.

You don't necessarily have to retire right when you're 65. Maybe you want to work a little longer, maybe retire a little sooner. Whatever that may look like for you. So, starting to determine that. And then maximizing those social security benefits. And looking into what you can get, what you can't get, what are the benefits of holding off on getting security deposits versus getting them right away. Looking all into that and really getting ready for retirement and what's ahead for your future.

Emma Protsik: And then when you enter retirement, of course, your income is changing a little bit.

Just depending on the different retirement products you have, it might be a little bit less than what you were used to when you [00:10:00] were working. So, it's just making those different lifestyle adjustments. But really about enjoying all the financial planning that you have been doing so far in that point.

So that's what we're all working towards. It's good to picture yourself if you're not there yet. You know, what is my life going to look like? 5, 10, 30, 40, however many years out. That long-term thinking about what you want those later stages of your career into retirement to look like. That's what's going to help you set those goals and set yourself up for success.

Jessica Quindlen: Awesome. I love that. So, as I said in the beginning, it is financial planning month in October, but of course we want to be financial planning throughout the year. So how can individuals continue their journey beyond this month and really help to make it a lifelong habit?

Laura Straub: Yeah, as we were talking about, setting those clear goals for yourself, envisioning your life X amount of years ahead. And then really creating that budget and tracking your spending. Cannot stress that enough. I know we talk about it probably every episode but having a [00:11:00] budget can really help you determine what those goals are, if they're sustainable for you and just keeping it relevant for yourself.

And then if you can, please automate as much as you can when it comes to savings and investments. Having it automatically take from your deposit is so helpful. That way you don't even have to think about it. It's doing it for yourself. It's a great way to kind of help with that.

And then diversifying your investments. Not having everything just in one thing, you're going all over the place. You do have your retirement accounts, you have your savings, you have your checking, things like that. And if you need help further again financial advisors are here to help you with that. And then beyond that, I'll kick it back over to Emma to talk about what she does with financial coaches.

Emma Protsik: Financial advisors are really equipped to help with more of that super long-term planning. So, Laura mentioned the three plus [00:12:00] years, they are really focused on that wealth building side of things. So, it is the true investing in the stock market and having different options there.

Financial coaches can also help you financially plan, though they are more focused on those short-term goals. Also, if you are experiencing any difficulties with your finances, our financial coaches can sit down with you, help you get those smart goals, figure it out. Figuring out all the details to make sure you're set up for success there.

Laura Straub: Yeah. And then with that, make sure you take the time to celebrate your own successes.

Once you hit a milestone that you've been working for, celebrate in some way. It doesn't have to be going out and spending money, especially if your goal was saving money. But it could be something, it could just be celebrating, even just on social media saying, “I hit my goal, y'all” and celebrating that. Make sure to take the time to recognize your accomplishments.

Emma Protsik: One other tip with that, make sure you're setting mini goals and not just focusing on that large goal. Because again, if you're trying to save a large [00:13:00] amount for a down payment or paying down a large number of balances for debt that can feel overwhelming. So set those mini goals. It's a nice little confidence boost and celebrate that.

Jessica Quindlen: I love that. Well, that brings us to the end of our show. Laura, Emma, thanks so much for being here. It was great to have you.

Emma Protsik: Thank you.

Laura Straub: Thanks.

Jessica Quindlen: Thank you for listening to Sound Cents from Ent Credit Union. Be sure to follow our podcast as well as rate and review us. I'm Jessica Quindlen. I will see you next week. Same time, same place.