October is "National Financial Planning Month" - yes, there truly is a month for everything - so I thought I'd take this time to share some of the most important financial advice I've been exposed to in my life and career as a financial planner for the past 20 years. While there are many more tips and financial nuggets worth extolling, following these top five is a good start: 

5 Financial Planning Tips

1. Don't procrastinate, there never is a "good time" to plan

Your job, spouse, life and especially your health is precarious. Lately, we've all seen how quickly technology can disrupt a steady job. Or maybe you've witnessed a friend go through a health crisis. I've seen all these things happen to clients. The best advice I can give is to not neglect your own financial planning and take the time now while you are the youngest and healthiest you ever will be to get your financial house in order. This may include getting a Will in place, building an emergency cash reserve, or having enough life or disability insurance on you and/or your spouse. The bottom-line is don't put off your financial planning till you have more time -- news flash -- there is never a "good time." 

2. Chip away at big savings goals 

Having enough money saved for retirement is a daunting goal, even some of my wealthiest clients feel like they never have enough. I've also seen young newly married couples get wrapped up in the day-to-day grind and never feel like they have any money left to set aside for retirement or their children's college. The best advice I give clients is no matter how big and scary the end goal is, the journey always begins with the first step. The best way to do this is to automate your savings by having a fixed amount taken out of your checking account and deposited into a mutual fund account. Small and steady contributions over time add up. 

3. Have a balanced portfolio and diversify how you save  

In the good times every one wants more stocks. They feel like they are "missing out" if their money isn't growing as much as the hottest tech stock, bitcoin, or whatever flavor of the market is the latest rage. Then things turn, it starts with small dips, then eventually investors who took on too much risk start to get rattled. They see their savings and retirement goals slowly start to disappear. That's not a good feeling. Having a balanced portfolio - some bonds, some stocks - can help dampen those down days. More often than not, a well diversified portfolio provides enough upside to stay ahead of the game. 

Diversifying how you save refers to diversifying your future income tax liability. If all you save in is a traditional 401(k) where you get a pre-tax deduction on the way in, but the money is taxable on the way out, then you are at risk of all your retirement income being taxable. This is not an ideal scenario. Granted you will most likely be in a lower tax bracket in retirement, however nothing is for certain (see tip 1) and by the time you need the money later in retirement it may be many more administration's away. Our government has a long history changing the tax rates, deductions, and credits. Furthermore, the more taxable income you have in retirement, the greater the chance your Social Security benefit is taxable. 

My advice, consider diversifying how you save. Consider adding Roth accounts - or a back-door Roth IRA - to your annual savings. I also own and advise my clients to consider whole life insurance for the tax-free build-up of cash value and the ability to access the money tax-free via a loan. (An unpaid life insurance loan is deducted from the death benefit.) This way in retirement I can have some money come out tax-free and some taxable, I am hedging my bet with future tax rates. 

4. Get control of your debt and spending

Debt comes at a high cost. Not only is there the interest cost, but there is the opportunity cost. The opportunity cost to making debt payments is the inability to save elsewhere, like a retirement account where the employer provides a match or a 529 education plan for your child's high school or college. 

Having debt in retirement is also costly, as you may need to take money out of a 401(k) or IRA to repay the debt. However, before you take money out of a retirement account you may have to account for the income taxes (unless it is a Roth). If that is the case, repaying the debt is higher than the actual cost of the debt, it is the payment PLUS the income taxes owed on the withdrawal. This can hinder the growth of retirement money. My advice, chip away at credit card debt, then student loan debt, then mortgage debt. In my opinion, you want to retire debt free, so making extra payments towards principal can help, assuming you have the cash flow to do so. CNBC had an interesting article on how debt may be making you sick, all the more reason to work towards paying it off: "Your credit card debt may be making you sick" 

5. Don't go it alone - unless you can really, truly manage all of it yourself 

If your situation is straightforward or you are disciplined enough to manage all of your financial affairs yourself, then you can make the argument for saving the money on hiring an advisor. However, I wouldn't recommend it. Most people left on their own will procrastinate. I called on a business executive for 5 years and he kept putting me off until one day he emails me and said he was diagnosed with a rare blood disease and we need to meet now to get a handle on the finances. By that point, he was not insurable for life insurance and long term-care insurance was too expensive for his spouse given her age. Procrastinating came at a steep cost. 

The fact is most people are too busy to really focus on their financial affairs. They get bogged down with life and work and neglect their asset allocation or spending and saving goals. In a recent study, Vanguard quantified the value a financial advisor can bring to a client's situation. By helping clients with their asset allocation, asset location, re-balancing, and keeping costs down on investments, financial advisors can add about 3% to the net return in a portfolio. That value should pay for the cost of using an advisor, and then some. Click here for the full report: Vanguard Quantifies the Value of an Advisor.

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