Before you retain a financial advisor, here are some things you can consider today to build a proper financial base.

Things to Do Before Retaining a Financial Planner15

1. TRACK YOUR SPENDING AND IMPLEMENT A BUDGET. It can be as simple as keeping tabs on your expenses every day, week or month. If you know what you’re spending, you can better understand how to save.

2. KNOW YOUR SAVINGS GOALS AND INVEST IN YOURSELF. If you didn’t start saving 10% of your pay in your 20s, you are behind the curve. If your car payment is bigger than your 401(k) contribution, you are making a mistake. If your latte bill is bigger than your Roth contribution—well, you get the idea. Waiting to save is the biggest financial mistake people make. If you are just starting to save in your 30s, you should target 15% of pay. If you are starting in your 40s, you should target 20% of pay. If you don’t have any money left at the end of the month, find a way to invest in your education or training. The best investment may be to increase your income potential.

3. BUILD AN EMERGENCY RESERVE. Now that you know what it takes to keep the lights on at home and the food on the table, every good financial foundation starts with an emergency reserve. You never know when you might get hit with a job loss or an illness or injury. The minimum emergency reserve you should build is three to six months of household expenses. If you tend to switch jobs often or if you are into activities such as wakeboarding, motocross, or extreme snowboarding or skiing, complete steps 3 to 5 and then come back and build your emergency reserves to six to 12 months of household expenses. If you are looking for a place to stash the cash, consider the online FDIC-insured money market accounts found at bankrate.com. If you want to invest your emergency reserves in mutual funds or ETFs, then you need to double the amount you save in case the emergency occurs during a significant market correction.

4. INVEST ENOUGH IN YOUR 401(K) TO GET THE MATCH. This is free money! There is no better jump-start to your investment program than getting a match on pre-tax money. If you earn a buck and take it home, you may have less than 75 cents after taxes to invest. If you put that same dollar into a 401(k) and get a dollar-for-dollar match, you have $2 invested! We typically suggest at least one-half of your contributions go into the Roth side of the 401(k). Consult your CPA.

5. PAY OFF NON-MORTGAGE DEBT. Organize your debt and focus on paying down outstanding balances with either the highest interest rate or the highest monthly obligation. You have to do the math. Many people simply target the highest interest rate debt or the smallest debt first. That may work, but another option to consider is to first get rid of the debt that has the highest monthly payment. Once that debt is paid off, you have more cash flow to tackle the next debt in line. Stop accumulating liabilities and buying depreciating assets, and start building wealth.

6. ASSESS, IMPROVE AND MONITOR YOUR CREDIT. Request a copy of your credit report once a year. At the very least, go to annualcreditreport.com to see what is listed under your name. Consider identity theft insurance as long as the ID theft resolution assistance program takes on all responsibility for fixing any identity theft issues. Don’t get duped into paying for credit monitoring and lockdown services that you can do yourself.

7. INSURE YOUR BIGGEST ASSET. Your biggest asset is your ability to earn money. It is more likely that people will spend some time unable to work due to an illness or injury than die at an early age. Disability is a leading cause of bad credit and home foreclosures. Disability insurance is extremely important. This is one product that is usually cheaper through your employer, so keep that in mind when evaluating job offers. If you can’t afford a full disability income policy, look at other options, such as Aflac. The good thing is that you cannot be oversold disability insurance. Most carriers are careful to insure only 60–70% of your current income.

8. PROTECT YOUR LOVED ONES. If you have people who depend on your income, you need term life insurance. Employer life insurance plans are not portable when you leave the job, and the plans are typically too expensive unless you have health issues. Consider 20- or 30-year level term policies. Make sure you find an insurance broker or get a referral to somebody who will shop rates for you. How much? The basic formula is easy: 10 x your annual income + $100,000 per kid + all outstanding debt. Unless you have gone way beyond each of these steps and you are a very wealthy high-income earner, don’t even consider buying one of those life insurance policies that include an investment component. Most whole life, variable life, universal life and index life insurance policies are garbage. Get your new term insurance in place before you ever cancel an old policy.

9. GET STARTED ESTATE PLANNING. At the very least you need an advance health care directive and a durable power of attorney. These documents spell out your health care desires if you are incapacitated and allow someone you trust to deal with your financial accounts without spending thousands on legal fees and court costs. A will can also spell out how you want your assets distributed and who would care for your children. If you are on a budget, you can search for a free California health care directive at oag.ca.gov and/or try one of the online legal document solutions, such as legalzoom.com or nolo.com. Once you own real estate in California, you should really work with an attorney to draft a revocable living trust. And don’t forget to update the beneficiaries on your life insurance and retirement accounts!

10. FUND A ROTH IRA FOR YOU AND YOUR SPOUSE. Roth IRAs allow you to build a tax-free retirement fund. You need to check with your tax advisor to make sure you are eligible. If you make too much money to fund a Roth IRA, then make sure to go back and max out your 401(k) deferral to bring down your taxable income, then discuss with your tax advisor the strategy of funding a non-deductible IRA and converting to a Roth each year. This strategy is also known as a “back-door” Roth IRA and can be a tax free as long as you do not have any other IRA’s. Search our podcasts for more information on the “back-door” Roth.

If you know what you’re spending, you can better understand how to save.

11. MAX OUT THAT 401(K). Increase your 401(k) contribution to the maximum allowed each year, currently $19,000 (or $25,000 if you are going to be 50 or older by the end of the year). Some 401(k) plans allow you to make addition after tax contributions that can be converted to the tax free Roth 401(k). Search our podcasts for “Mega Back Door Roth”.

12. GO BEYOND YOUR RETIREMENT ACCOUNTS. If you still have excess cash flow, it is time to go beyond your 401(k) and Roth IRA. Pick a great index fund or exchange-traded fund, and start making automatic monthly contributions directly from your checking account. You will be surprised at how quickly the balance grows and you will be able to access the funds at any time.

13. CONSIDER ACCUMULATING OTHER FINANCIAL ASSETS. Once you have saved the equivalent of one year’s worth of income by implementing step 12, you will have the freedom to look at accumulating other investment opportunities, such as real estate. Positive cash flow leveraged real estate can be a powerful wealth building tool, but you need to have liquid assets to make down payments and deal with repairs, vacancies or horrible renters.

14. REBALANCE YOUR ACCOUNTS AT LEAST ANNUALLY. Studies show that asset allocation is more important than market timing and individual stock selection. Stop investing only in the funds that did the best over the last three to five years. Rebalancing forces you to take profits and reallocate into asset classes that may be “on sale” and poised for a rebound. Make sure to log in to your 401(k) and look for the automatic rebalancing tool.

15. CONSIDER COLLEGE SAVINGS. We suggest making sure your retirement plan is on track before funding a 529 college savings plan or an education savings account. If you do have extra cash flow, check out the Newsroom and Resources sections at newfocusfinancial.com for blogs, podcasts and videos on saving for college. States that offer great direct-sold 529 plans include California, Utah, Alaska and Nevada. Also be sure to check out cash-back options at upromise.com. Read the prospectus carefully before investing.

If you are still struggling to make decisions, wondering if you are making mistakes, investing emotionally or lacking the time to organize, implement and monitor your financial plan, it is time to get an advisor.

Nothing in this material should be considered investment or planning advice. This is not an offer to buy or sell any product or security. Please consult a broker or advisor before taking any action. Investment Advisory and Financial Planning Services are offered through NewFocus Financial Group, LLC, a Registered Investment Advisor. The Advisor does not attempt to furnish personalized investment advice or services through this publication. Some of the information given in this publication has been produced by unaffiliated third parties and, while it is deemed reliable, the Advisor does not guarantee its accuracy and makes no warranties with respect to results to be obtained from its use.

NewFocus is an SEC registered investment adviser owned by Chad Burton and Robert Black which maintains a principal place of business in the State of Washington. The Firm may only transact business in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about NewFocus’ registration status and business operations, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov.

San Mateo1900 S. Norfolk St., Suite 350San Mateo, CA 94403

Vancouver410 W. 12th St.Vancouver, WA 98660

newfocusfinancial.com