The Bare Minimum Financial Plan


It doesn’t come as a tremendous surprise, but a new study by Prudential Financial finds that most women have no long-term financial plan. Of course, many experts say men are lagging in planning, too.

The study says only a third of women have a plan in place, and just one in 10 of those aged 25 to 34, a period when people should really get started. The study says this is because woman are pinched for time, short on financial knowledge and distrustful of many financial advisers.

But maybe financial planning has been made more mysterious and intimidating than it needs to be. Even the most elaborately detailed long-term plan is really only a rough guideline, as critical factors like investment returns, inflation, government tax policy and life expectancy can’t be forecast with much certainty.

So a simple plan might be almost as good as a fancy one. At any rate, a simple plan is better than none at all. What, then, would be the most important features to have in a financial plan you could put together yourself in a couple of hours?


When people think about financial planning, they tend to focus on investments. But household budgeting is really the foundation, because spending less allows you to save more. The goal is to limit spending so you can save 10% to 15% of your income — more if possible. Tally all your expenses for the month and you’re sure to find savings. Use the Retirement Planner to set a savings goal.

Debt Control

As a general rule, try to restrict borrowing to buying a home and paying for higher education. High credit card debt, car loans and other borrowing diverts money from savings to interest payments. “Debt-free by 60” is a good goal. If you can’t do that, try at least to be free of burdensome debt before retiring. A burdensome debt is any you would have trouble paying if you had a financial setback.


Although there are tens of thousands of investments to choose from, a beginner should be able to sleep easily by investing in a single target-date fund. These are funds that own a collection of mutual funds that invest in stocks and bonds. You pick a fund with a target date matching your expected retirement. As you get older, the fund will automatically shift money from growth-oriented stocks to safer, income-oriented bonds. Search for target-date funds by selecting your date in the “category” box in Morningstar’s (Stock Quote: MORN) fund screener.


The biggest enemy of any financial plan is our tendency to find excuses to spend too much, pile up debt or miss monthly savings goals. But automating parts of your financial life, you can avoid temptation. Have your paycheck automatically deposited in your checking account, then have your investment money automatically drawn from that account every month. Your bank, brokerage or mutual fund company can tell you how.

Tax Benefits

Yes, tax matters can be horribly complex for some people. But most people don’t have to worry about things like trusts and estate taxes. In fact, many don’t even have to itemize their federal tax returns, because they do better taking the standard deduction. Be sure, however, that you do get all the tax benefit you can from a 401(k) or similar plan at work. In college savings, consider a tax-free 529 plan.

OK, so maybe figuring all this will take three or four hours, not two. But the point is that there’s no reason to hold off until you can do an elaborate plan. Start simple — you can always get fancy later.

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