The power of K.I.S.S. finances

A personal finance plan so simple, a reptile could do it. Or maybe not. We haven't really tested this yet on animals. (aleksandarfilip/stock.adobe.com)What you spend money on

The first and most crucial part of KISS is understanding where your significant monthly expenses are. This usually entails a mortgage and car payment(s). If you can keep these under control, more often than not you'll be in great shape. You don't need to feel like you can't buy a cup of coffee for fear of messing up your financial outlook. You should however decide how you will consistently track expenses. I'd suggest looking at free options like Mint.com, PocketGuard.com or the premium app YNAB (youneedabudget.com).

What you save

Second, establish an emergency savings fund. A 2017 Bankrate study found that only 39 percent of households are prepared for unplanned $1,000 expense. While studies like this have flaws, the lesson is simple: You need emergency savings.

Here are two good rules of thumb: If you're a single-income household, have six months of expenses saved. If you're a dual-income household, save three months of expenses. Everyone is different, so find a level that is appropriate for you.

How you protect you and your family

Third, protect yourself and family from disability and death. For life insurance, I recommend you skip whole-life or permanent insurance and buy term. Target a death benefit of five to six times your annual income.

For disability insurance, look for a policy that allows for own-occupation (that cover your inability to perform you work) and allows for future increase options.

Take advantage of taxes

Fourth, when it comes to investing for the future and retirement, max out tax-deferral options first. Take advantage of employer retirement plans. If there's ever an employer match, ensure you're matching that amount. That's free money you're leaving on the table! I'd suggest doing this over aggressively paying down student loans or other debt.

Depending on your household income level, consider contributing to a Roth IRA. These plans allow for your money to go in after-tax, but grow and be taken out tax-free in retirement.

Make a plan

Fifth, figure out what you need for retirement, write down your plan, then execute it.

Example: Take your annual expenses (say, $75,000) and multiply by your estimated retirement years. That calculation, while simple, cancels out inflation and any earnings you'd make on investments to project a ballpark figure: 30 years times $75,000 equals $2,250,000.

Now, evaluate where you are today, and what rate of return you need to get to that number. (Here's an easy calculator from AARP.) Remember to write down your investment plan on how you plan to invest and don't get distracted by chasing returns or selling when the markets look scary. Emotions are the enemy in investing.

Finally, remember that if you have the time and interest, you can self-manage your financial life. I'm an advocate for professional help, but that doesn't make sense for everyone. Begin to take control of your finances and your future self will thank you!

Isaiah Douglass, CFP, is owner of ID Financial Planning and Wealth Management based in Noblesville, Indiana, a fee-only firm focused on veterinarians as other health professionals.