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How to make a financial plan for your future when you’re feeling clueless

Bethany RamosFinance, First-Time Homebuyer, Home Buying, Homeowners, Refinance

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When it comes to our financial planning, the outlook ain’t so grand. Over half of us think we could do a better job of managing our money and preparing for the future, yet only a third of us are creating a plan of action.

Don’t have a plan? Get one

In early 2015, Northwestern Mutual released the results of a survey conducted on over 5,000 adults in the U.S., ages 18 and older. The study revealed that while 58 percent of Americans believe their financial planning could use some work, only 34 percent of people have made an actual plan.

While we are not professional financial planners, we are successful mortgage lenders who have spent our entire career helping our customers make smart decisions on the biggest financial purchase of their lives. Because of this experience, we can help you hammer out a major component of your financial plan — your mortgage — to allow many of the other pieces to fall into place. We have also consulted with several leading financial experts in their industries to give you the framework for a realistic financial plan you can use to manage your money.

If you’re paying too much for your mortgage, you’re going to have a hard time paying your bills and balancing your budget. Contact a loan officer for help.

4 ways to plan for your future — using your mortgage

As you start crunching numbers to create your personal financial plan, you’ll soon realize your mortgage is a big piece of the pie.

Get started

Here’s how to make it work in your favor:

  1. Set a goal.

financial planning

Making a smart, profitable, and achievable financial plan starts with setting a reasonable goal you can reach within a few months or years. Do you want to save more money? Buy a house? Pay off your home and move into a bigger one? Decide on a goal, and you can start moving toward it with a money management app like Mint or Wally. If a new home or refinance is in your future, this should be a major component in your financial goal-setting.

It can be that easy. John Hansbrough of Hansbrough Financial & Insurance Services says, “The best way to make progress with anything is to measure it. Just as you would step on a scale every day, you should check your spending every day. Tools like Mint help you begin to see where your money goes every single day, and you’ll naturally begin to make better spending decisions.”



  1. Lay the foundation.

financial planning

If you’re thinking about buying a house, we consider getting prequalified for a home loan to be the most important first step you can take. Since your mortgage is likely to be among one of your biggest monthly bills, you can use this estimate as a baseline budget for the rest of your monthly expenses.

Get the ball rolling. Download our free LoanFly app to prequalify, request a mortgage rate, and calculate your monthly payment.

David Lashkhi created his free Daily Budget Planner app for just this reason — to make day-to-day budget tracking as easy as possible. He says, “Let’s say you’re getting $3,000 after taxes monthly, and you want to save at least $300 a month. So, you can spend $2,700 monthly. You divide this amount by the amount of days in a current month and get your daily limit: $2,700/$30 = $90. This means that whatever you do, you can’t spend more than $90 daily.” Lashkhi says he’s used his method to successfully save money because – in his opinion — it doesn’t really matter what “category” we spend our money on, whether food, clothes, fun, or bills. The only one thing that matters is the amount itself.

“If you have spent less, for example $50, the extra $40 is adding to your next day’s limit. Then you have $90 + $40 = $130 to spent the next day. If you exceed your daily limit by $10, for example, this amount will be deducted from your next day’s limit: $90 – $10 = $80,” he says.



  1. Decide on a down payment.

financial planning

Many people are under the impression that a bigger down payment is better, though that isn’t always the case. Based on the current state of your finances, your mortgage lender will be able to tell you if a 10 or 20 percent down payment offers a larger profit and will be worth your investment. Once you have an idea of how much you’d like to put toward a down payment on a house, you can start routing a set amount into your savings each month. The easiest and lowest-cost way to stay on track toward your goals is to set up multiple accounts, with one dedicated to each goal, Adam M. Grossman, financial planner, investment advisor, and founder of Mayport Wealth Management, says.

“For short-term goals, use an online bank like Ally or Capital One. These allow you to create, at no cost, multiple online savings accounts. You can give each one a nickname — for example, ‘New Car’ or ‘Vacation’ — and you can connect them to your checking account, facilitating regular contributions,” Grossman says.

For longer term goals, Grossman suggests using the same concept: set up individual accounts earmarked for each major goal. “These might include funds for a home down payment or for college. Again, there is no cost for multiple accounts, and because all your accounts are consolidated on one screen, there is very little complexity,” he explains.



  1. Create good financial habits.

financial planning

You made a basic financial plan that most likely centers around saving up for a new home or paying off your mortgage. Now it’s time to put that plan into action. Along with paying your bills on time, financial experts endorse healthy money-management habits, like setting aside at least 10 percent of your monthly earnings, deciding on a retirement age, saving money for your children’s future, and keeping an emergency fund that equals at least 3-6 months of your living expenses. Common budget targets are also widely recognized, like spending no more than 10 percent of your gross income on utilities, no more than 15 percent on food and transportation, no more than 28 percent on credit card debt and personal debt including car loans, and no more than 38 percent on total debt including your mortgage. (Note that 38 percent is the preferred debt-to-income ratio and is lower than the 43 percent recommended by the CFPB.) These habits will not only help create good financial health — they’ll help you to qualify for a mortgage loan easier.

Consider minimizing your expenses with a mortgage refinance if it’s your goal to pay off your home early.

Hansbrough recommends saving in the proper order.

Build an emergency reserve — a good rule of thumb is three months of living expenses, he confirms. Then save to invest for the future, not the other way around. “Let’s say you get in an accident and need to make a down payment for a new car. $5,000 sitting in your 401(k) isn’t going to be very helpful to you because you will pay taxes and penalties to access that money. Instead, build your savings so that you have a financial cushion in the event of an emergency or sudden necessary purchase,” Hansbrough says. If you’re having a hard time getting these habits to stick, we recommend meeting with a financial advisor.

Making a plan, meeting with your loan officer and financial planner, and taking actionable steps each month can move you that much closer to your goal, whether it’s buying a new house or putting your kids through college. We can’t wait to see you at the finish line.

For educational purposes only. Please contact your qualified professional for specific guidance.

Sources are deemed reliable but not guaranteed.

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