Why Financial Planning Matters at Every Age

Financial planning is a lifelong journey, not a one-time task. It provides a framework to ensure your financial stability and security through every stage of life. Whether you’re just starting your career, supporting a growing family or entering retirement, a solid financial plan helps you manage resources, set achievable goals and prepare for unexpected challenges.

As income sources shift and the physical and mental effects of aging start to take their toll, having a clear strategy to manage expenses, investments and potential healthcare costs ensures peace of mind, prevents costly mistakes and serves as an additional defense against scammers. This proactive financial planning can protect your hard-earned assets and reduce stress for you and your loved ones.

Step 1: Choose a Trusted Financial Advocate

A financial advocate is someone you trust to manage your financial affairs if you are unable to do so. This person plays a critical role in protecting your financial well-being in the long term and ensures that your money is handled according to your wishes. Your advocate might be a spouse, adult child, close friend or even a professional advocate, but the most important qualities to look for are trustworthiness, financial responsibility and a deep understanding of your needs, plans and values.

The best time to choose a financial advocate is before you need one; we recommend choosing one at 65 and setting a full financial plan with them. Then if and when they are needed, you won’t have to struggle to bring them up to speed.

What Does a Financial Advocate Do?

A financial advocate can do as much or as little as you need them to. For example, you could put them in charge of a wide range of tasks, including:

• Paying bills and managing expenses: Ensuring all obligations, such as utility bills, mortgages and subscriptions, are paid on time.
• Handling taxes, insurance claims and benefits applications: Keeping up with potentially more complicated tasks to make sure you remain financially protected.
• Managing investments and property: Overseeing portfolios, selling or buying assets and making sound financial decisions that align with your long-term goals.
• Safeguarding against fraud or exploitation: Protecting you from scams, monitoring transactions and ensuring your money is used appropriately.

Key Qualities to Look For

When selecting your financial advocate, prioritize the following traits:

• Trustworthiness: Above all, choose someone who will act in your best interest and honor your wishes.
• Reliability and availability: Select someone who can commit the necessary time and attention to manage your affairs effectively.
• Financial acumen: Prior expertise is ideal, but the willingness to learn and seek guidance may be all that’s needed for them to get started.
• Good communication skills: They should be comfortable and clear when discussing financial matters and coordinating with other family members or professionals when needed.

Avoid These Pitfalls

To ensure your advocate can handle the responsibilities effectively, avoid choosing someone who:

• Faces significant personal financial difficulties or legal troubles.
• Has a history of dishonesty or irresponsible behavior.
• Struggles to communicate or maintain organization.
• Shows signs of entitlement or a lack of understanding or concern about your values.

Additional Considerations

• Backup Advocate: It’s wise to name an alternate advocate in case your primary choice becomes unavailable due to unforeseen circumstances. This ensures continuity in your financial care.
• Professional Help: If no personal connection seems appropriate, forcing one or more of your family or friends into the role when they aren’t a good fit may compromise your relationships and your finances. In this case, consider hiring a professional instead. 

Initiating the Conversation

Once you’ve chosen your potential advocate, initiate an open discussion about the role. Explain your expectations clearly, provide them with an overview of your financial situation and outline the responsibilities involved. It may also be helpful to share why you selected them, reinforcing the trust you have in their abilities.

By proactively choosing and preparing your advocate, you ensure your financial affairs will be handled with care, reducing stress for both you and your loved ones in the future.

Step 2: Organize and Simplify Your Financial Information

Streamlining your financial records is an essential step in effective planning. Begin by creating a comprehensive inventory of your financial accounts, assets, liabilities and key documents. This might include:

• Checking and savings account details.
• Insurance policies, including health, life and long-term care.
• Investment and retirement account statements.
• Loan and credit card account information.

Store this information securely in a password-protected digital file or a fireproof safe. Share the location of these records with your financial advocate. Simplify further by consolidating accounts, enrolling in direct deposit for income and setting up automatic payments for recurring bills. These steps reduce complexity, minimize errors and make it easier for your advocate to step in when needed.

Step 3: Start the Conversation

Once you’ve chosen a financial advocate and organized your records, the next step is to have an open discussion about your financials, current and future. These conversations are essential for aligning expectations and ensuring your wishes are understood.

You don’t have to cover everything in one meeting. Gradually introducing your advocate to your financial plan helps you to decide how well they will do in the role and helps them be fully prepared. 

Step 4: Plan Your Financial Future

Financial planning is most effective when it aligns with your specific goals and needs. Consider your priorities as you age, such as maintaining a comfortable lifestyle, funding healthcare expenses or leaving a financial legacy for your loved ones. Defining your goals will help guide your advocate and shape your financial plan.

Key Steps to Define Your Goals

• Assess your current and foreseeable future expenses: Include living costs, anticipated healthcare needs and any plans for travel or hobbies.
• Identify priorities: Are you focused on preserving wealth, supporting family members or donating to causes you care about?
• Plan for contingencies: Account for emergency expenses, such as medical emergencies or home repairs, by building a robust emergency fund.
• Document your wishes: Clearly outline how you want your finances handled to ensure your advocate has clear communication of your intentions in writing.

Step 5: Legally Appoint Your Advocate

Creating legal safeguards is a critical step in protecting your financial future. Without proper documentation, your advocate may face difficulties accessing accounts or making decisions on your behalf.

Essential Legal Protections

• Power of Attorney (POA): Grant your advocate legal authority to manage your financial affairs. Ensure the POA is durable so it remains in effect if you become incapacitated.
• Last Will and Testament: Specify how your assets will be distributed after your passing, minimizing potential conflicts among future heirs.
• Living Trust: If you have significant assets, a trust can streamline estate management and provide privacy.
• Beneficiary Designations: Keep these up-to-date for retirement accounts, insurance policies and other financial products to ensure they reflect your current wishes.

Step 6: Prepare for a Smooth Transition

Knowing when and how to transition financial responsibilities to your chosen advocate ensures your financial well-being remains protected. This process can be gradual, providing time for both you and your advocate to adjust.

Recognizing When Transition is Necessary

You can designate certain indicators to signal to yourself and your financial advocate that it is time to begin the transition of financial responsibility:

Red Flags:

• Multiple missed payments for bills or taxes.
• Risky financial decisions that lead to noticeable losses.
• Moving into a care facility or an extended hospital stay.
• Diagnoses of dementia, serious illness or cognitive decline.
• Suspicious individuals who gain access to your financial or personal details.

Yellow Flags:

• Requiring regular assistance with daily living tasks.
• Reduced confidence or ability to manage online or phone-based financial transactions.
• Consistently overlooking financial details or making repetitive errors.
• A shift in personal habits, like avoiding hobbies or neglecting social connections.

Temporary health issues, like a surgery or short-term illness, may also require your advocate’s managing finances during your recovery.

Steps to Transition Financial Responsibility

Making the shift doesn’t need to happen all at once. As long as you start early enough, it’s easy to start small and gradually accustom yourself to the changes.

1. Assign Initial Tasks:
   Start by asking your advocate to handle smaller responsibilities, such as setting up an autopayment or reviewing account activity. Gradually increase their involvement as needed.
2. Grant Limited Access First:
   Many banks and financial platforms allow “view-only” access to accounts, which can give your advocate oversight without full control.
3. Introduce Key Professionals:
   If you work with accountants, financial advisors or lawyers, introduce your advocate to these contacts. This builds familiarity and helps streamline communication when needed.

The Role of Ideal Credit Union in Your Financial Journey

At Ideal Credit Union, we provide tools and resources to help you build a secure financial foundation. Our savings products, including high-yield savings accounts and certificates of deposit (CDs), are designed to help you grow your wealth with competitive rates and reliable security. Ideal Credit Union offers trusted solutions to help you save with confidence and prepare for the years ahead.

Start saving for your Ideal financial future today!