Motley Fool Money - The 2026 Financial Planning Challenge

Starting point is 00:00:00 Merry New Year, fools. Welcome to the first installment of our 2026 financial planning challenge on this Saturday personal finance edition of Mali Fool Money. I'm Robert Brokamp, and you know your financial well-being depends on more than the value of your investments on any given day. There's also the money you owe, the taxes you pay, the benefits you receive, the place you live, and the preparations you've made for the unexpected and the inevitable. Getting it all right takes a lot of time. knowledge, old-fashioned hard work. That's why together we will make 2026 the year of fiscal fitness. The first Saturday episode of each month we will focus on a key component of a financial plan, including spending, investing, insurance, retirement planning, estate planning, and taxes. If you follow along with us throughout 26, you will end this year in the best shape possible,

Starting point is 00:00:59 perhaps in the best shape you've ever been. For each of these monthly episodes, I'll be joined by a foolish colleague to discuss what you should do and how to do it. This month, I am joined by a certified financial planner and chartered financial analyst Amanda Kish. Amanda, welcome to Motley Fool Money. Thank you so much. I'm glad to be here. We're very happy to have you. This first month, we are calling the financial truth serum. Here's how I think about it. So if you're a long-term investor in individual stocks, would you buy shares in a company that didn't issue financial statements? Of course you wouldn't. How would you know how much money the company makes? How much it spends, whether it's profitable, and ultimately how much it's worth. Well, right now you're

Starting point is 00:01:38 investing in an entity that's more important than a stock, you and your family and your family's finances. Together, your income, expenses, debt, and savings all add up to the investment that will have the biggest impact on your future financial successes. So it's important to create your own financial statements to see where you are and where all your money is going. So today, Amanda and I are going to cover five steps to starting 2026 offright and documenting your finances starting with number one, choose a when and how. Thank you, bro. And this first step of choosing a when and how is very important

Starting point is 00:02:13 before we actually dive into doing any of the financial work. So as you know, financial planning isn't just a one-and-done activity. It requires dedicated time. And if you don't actually put it on your calendar, it's much less likely to actually happen. We're all busy nowadays. So this first step, we would encourage, people to actually establish a specific day and time when you're going to sit down and do the work

Starting point is 00:02:40 of tracking your financial life. So pick a regular time slot that works for your life. For some people that might be a Sunday evening with a cup of tea before the work week starts. For other folks, it might be a quiet Saturday morning or even a workday lunch hour. So maybe it's the 15th of every month. One other approach is to schedule that time by week. around pay days when you're probably already paying bills, dealing with aspects of your financial life. So the key here is consistency in treating it like any other important appointment. And if you're thinking, you know, is this really something that I need to schedule? I'd say the answer is yes, because without that type of structure, financial tasks become these things that we can push off sometimes indefinitely.

Starting point is 00:03:26 I'll look at those accounts later. I'll create that budget later. But if you have the standing appointment, it becomes much more ingrained. much more of a habit. So you're not constantly making decisions about when to deal with money stuff. It's just built into your routine. And having that dedicated time

Starting point is 00:03:43 means you can actually focus without feeling rushed or distracted. I've tried this in various ways over my life, and I've had to change it depending on what was going on. So it used to be Sundays at 7 o'clock, and then once my kids got older, Sunday evenings became kind of chaotic and moved it to Friday morning at times,

Starting point is 00:04:00 Wednesday morning at times. But I'm a big believer in the first. fact that there's a study actually out there that says, if you put something on your calendar, it's 70% more likely to happen. And then I recently learned about another tip from Emily Pote, our benefits manager here at the Motley Fool. She started doing things with a friend, with a money buddy. She calls it their financial fund night. They just do their own separate finances, but that's a standing date with another person so they know that they're going to sit down and take care of it. So I thought that was a pretty good idea. All right, let's move on

Starting point is 00:04:31 step number two, complete your full financial inventory. All right, step two, the full financial inventory is basically taking stock of everything in your financial life. So we're talking about all your income sources, regular expenses, every single account you have, checking, savings, investing accounts, retirement accounts, your debts, as well as your major assets, college savings, or 529 plans, anything and everything related to your family's financial life. That could sound overwhelming, but January is actually the perfect time to do this because your own statements are already available online or hitting your mailbox. So all that information that you need should be readily accessible. And this type of inventory serves a couple of purposes. And I think

Starting point is 00:05:18 it's one of the more valuable exercises you can do. So if you think of a financial plan as a roadmap, you aren't going to know where to go or how to get there if you don't have a good starting point, if you don't know where you are today. So the benefit of creating this inventory is that it gives you this complete visibility. So a lot of people have forgotten accounts or maybe don't have a clear picture of everything in one place. So it's good to have the opportunity to get that all down and have a full accounting of everything that you have. And beyond just the benefit of knowing what you have, this inventory really becomes the foundation for everything else that we're going to do this year. Again, you can't make the plan if you don't know where you're starting from.

Starting point is 00:05:54 And it's something that people don't always think about, and bro that you've talked about, is having a document like this can be very valuable for estate planning purposes, or if something happened to you, do your spouse or kids know where everything is? So that's important to have for that reason as well. Yeah, that's a very important point. A lot of what you will collect this month will be the foundation for a lot that we do, including the estate planning, as you mentioned, including retirement calculations, including insurance, making sure that you have enough insurance to cover everything you own. So a very good starting point. You will start receiving stuff in the mail, your email or your regular mail. So I think it's a good idea to have a folder

Starting point is 00:06:31 next to your wherever you process your regular mail to put all your financial documents, your tax documents. Those are going to start coming in a month or so. And I have a separate folder in my inbox whenever I get anything financially related, especially at the year end, I put it there. So a couple other tips there to consider. The old adage goes, it isn't what you say. It's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic

Starting point is 00:07:13 sporting personality with elegance to deliver a truly instinctive drive. Inside, you'll find true modern luxury with the latest innovations in comfort. Use the cabin air purification system alongside active noise cancellation for all new levels of quality and quiet. Whether you prefer a choice of powerful engines or the plug-in hybrid with an estimated range of 53 miles, there's an option for you. With seven terrain modes to choose from, terrain response two fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at range rover.com. All right, let's move on to step number three, track your spending for 30 days. So tracking spending is something that can get a little bit real for some folks. So we're going to start off with tracking your spending for at least 30 days.

Starting point is 00:08:00 Ideally, you track longer. 60 or 90 days is going to give you a better picture. But 30 days is a good start because that's a little bit more manageable and can give you some valuable insights. And the goal here is to capture every single dollar that goes out, whether that's your mortgage payment to your $4 coffee, to your streaming services that hit your credit card every month. And this type of exercise is important because most of us just, genuinely don't know where our money goes. We may think we do, but until you actually track it, you're probably going to be surprised. You might find out that you're spending way more on restaurants or DoorDash than you realized, or those small subscriptions, those one-off

Starting point is 00:08:37 subscriptions may add up to a hefty amount every month. So just beyond that awareness, this tracking really serves as a foundation for so many other financial planning activity. So when we get to retirement planning later this year, we're going to need to know how much you actually spend to live your life. You can't figure out how much you need to save if you don't know how much you need. And this kind of 30-day snapshot start to give you that baseline. And there are several different ways you can track spending from very low-tech, writing things in a journal to spreadsheets to more high-tech financial planning and budgeting app. So there's definitely a lot of systems out there. You can find one that works for you. Yeah, and I'll just emphasize that.

Starting point is 00:09:17 There are so many ways to do this, and it will depend a lot on your preferences. What do you want to interact with? Do you love spreadsheets? Do you want an app on your phone? Do you want something on your desktop? So that's something to think about. A lot of these methods are free. Some will require a cost, so you think about that one as well.

Starting point is 00:09:37 And I think it's also important to think about whether you want to choose something aggregates information from your bank and brokerage accounts. A lot of apps will do that, like Empower, good budget, Monarch money, Quicken, Rocket Money, Tiller, Wynab, those are all ones to consider. But then there are just regular old spreadsheets, and you don't have to start from scratch for that. There's a lot of free templates available out there online. One of my favorite websites for such things are budgets are sexy.com.

Starting point is 00:10:03 It's a great place for free budgeting templates. Tiller is one that you can pay for, but they offer free templates as well. And the Microsoft website actually has tons of free Excel templates. So if you're looking for a way to track your spending through a spreadsheet, that's one way to go. All right, let's move on to step number four, calculate your personal net worth. So if you've never calculated your net worth before, it's actually pretty straightforward. Your net worth is simply everything you own, minus everything you owe. So you just take your assets, bank accounts, investments, retirement funds, home equity, subtract your debts, mortgage,

Starting point is 00:10:36 student loans, credit cards, car loans. And then what's left is your net worth, which can be negative or positive depending on where you are in life. And this number is, important because it's a very good indicator of your overall financial health. So income alone tells one story. Savings rate is another part of that, but your net worth tells more of a complete story. Someone could have high income but also a massive debt. So that net income figure is a little bit more revealing. The real value in that isn't the number itself. It's in tracking that number over time. So your goal, no matter where you're starting from, is to see your net worth grow year over year. You can't track growth if you've never established a starting point. So that's part of

Starting point is 00:11:20 what we're doing this month. We're planting that flag that says, this is where I am on January 1st, 2026, and then a year from now, five years from now, you can look back and see your progress. Sometimes we get questions about what should be included in my assets. So I'll just give my take, Amanda, and you can tell me if you agree. Obviously, it's certainly all your investment accounts, your 401ks, your IRAs, your brokerage accounts, your bank accounts, things like that. The questions come for things like, what about my house, what about my cars, what about all the stuff in my house. And I would say house is probably something you want to include there. I'm kind of on the fence about cars. I don't know if you want to include it. It's a depreciating asset. On the other hand,

Starting point is 00:11:57 if you have a car loan, you're putting that in your liabilities, so you should probably have an offsetting asset there. All the stuff in your house, probably not. But it depends on, you know, what you have. If you have some really valuable collections, you know, gold and silver worth a lot these days. If that is something that you have bought, especially as a potential thing that you would sell in retirement, maybe it makes sense to put that on your balance sheet. What do you think, Amanda? I think that's exactly right. Cars can be included if you have that offsetting liability, but totally agreed with the stuff. Most of your stuff, unless you're a collector and have things that are antique or have significant value in the resale market, the stuff,

Starting point is 00:12:35 although it has value to you, probably doesn't have a lot of value other than that. So it's probably better to not focus on things like that in that overall assessment. All right. Let's move on to step number five. Establish your financial baseline summary. All right. So the final step for this month is creating what we call the financial baseline summary, which is basically a one-page snapshot that captures where you stand financially today.

Starting point is 00:13:00 So you can kind of think of it as the executive summary of all the work that you've done so far this month. So you've done your inventory. You've tracked your spending, calculated your net worth. And now we're distilling all of that into one clear, concise document that you can reference any time you need to see. And this is important because this is a summary that can serve as an important financial dashboard for you.

Starting point is 00:13:22 So when you've got information scattered across multiple accounts, different financial institutions, maybe different spreadsheets and apps, it can be kind of hard to see the bigger picture. So this one-page document brings it all together. It's what you can review during your future financial check-in times to see if you're on track. It's what you can update as your situation changes. So it just makes a lot easier to have conversations, whether that's with a spouse, financial advisor, or even yourself when you're making these big decisions. The final thing I would recommend that you put on it is at this point, January 2026, how do you feel about your financial situation, right? You call it your money temperature or whatever.

Starting point is 00:14:03 But, you know, maybe put on a scale of 1 to 10, how do you feel, one being out of control and completely behind, 10 being on top? top of everything. And that way you could sort of measure whether you're improving over the course of the year as we work through this financial planning challenge of 2026. All right, those are our five steps. Amanda, do you have any final thoughts? I would say we've done a lot of talking. We've thrown a lot of information at you and it may seem overwhelming. It may seem like a lot of steps. But I think my biggest piece of advice would be to just take one step to get started. So start with setting that time aside. And then once you're sitting in that scheduled financial check in a appointment, try to do just maybe even 1% more than you did yesterday or last week. So just any

Starting point is 00:14:44 small incremental improvement that you can make, any action you can take to improve your financial situation to kind of get this information together. That's really going to lead to big changes over time. So even if all you can do is something small, take that step, get started, and go from there. I love that. And I'll add something that's similar, and that is just don't strive for perfection, right? Don't spend hours designing the best spreadsheet or looking for the best financial app. Do a little research, but then just get started. Just start doing something. Don't let the perfect be the enemy of the good. You'll have time to improve anything down the road. After all, we're going to spend a whole year on this. But unless you've been impeccable with your money, I promise, promise that you're

Starting point is 00:15:23 going to learn a thing or two by putting a money hour on your weekly calendar, calculating your net worth, tracking your spending, and creating a financial baseline summary. Thanks for joining us, Amanda. Thank you. In a world full of noise, long-term thinking stands out. On the Capital Ideas podcast, Capital Group leaders explore the decisions that matter most in investing, leadership, and life. It's a rare look inside a firm that's been helping people pursue their financial goals for more than 90 years. Listen to the Capital Ideas podcast from Capital Group, published by Capital Client Group, Inc. It's time to get a diner fools, and Amanda and I just suggested a bunch of items for your to-do list.

Starting point is 00:16:04 But permit me to add something else. I'd love to hear your tips and tricks for managing your money. How do you keep track of your spending? How do you track your investments? How do you monitor your progress? How do you get financial things done? If you have a recommendation or unique insight, email it to us at Podcasts at Fool.com. That's Podcast with an S at Full.com by Tuesday, January 6th,

Starting point is 00:16:26 and I'll pass along a summary and some noteworthy suggestions in next week's episode. Again, email them to Podcasts at Fool.com. And that brings us to the end of the show. Thanks for listening and thanks to Bart Shannon, the engineer for this episode. As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards

Starting point is 00:16:54 and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Fool on, everybody.

Motley Fool Money - The 2026 Financial Planning Challenge

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.