If you’re serious about pursuing your financial goals, first get your finances in order. Here are a few simple steps to keep you on track:
Make time to understand your basic financial facts—how much your net worth increased during the past year, how you are spending your income, or how well your investments have performed. Organizing your finances will assist in tracking this information.
Budget your expenditures.
Inefficient and wasted expenditures are often major obstacles to saving for financial goals. Analyzing your expenses will help you find ways to reduce spending and increase your savings.
Develop explicit written financial goals.
Goals help set our financial priorities and provide motivation for reducing spending and saving for the future. Quantify your ultimate goal and interim goals so your progress can be tracked.
Pay yourself first.
If you wait until the end of the month to see how much money is left over for saving, you’ll probably find that the answer is nothing. Pay yourself first, and then find ways to reduce spending to pay the rest of your bills.
Establish an emergency cash reserve.
This will give you funds to deal with short-term emergencies such as a temporary job loss, a short-term disability, a major home repair, or a large medical bill. How much you need in the reserve will depend on your age, health, job outlook, and ability to borrow quickly.
Get your debt under control.
Take steps to reduce your consumer debt as much as possible—any interest payments are just reducing the amount available for saving. There are a variety of strategies you can use to either reduce your debt or lower the cost of that debt.
One of the best ways to invest consistently is to make investing automatic. Make arrangements to have a specific amount deducted from your checking or saving account periodically and transferred to an investment account. (Keep in mind that an automatic saving plan, such as dollar cost averaging, does not assure a profit or protect against loss in declining markets. Because such a strategy involves periodic investment, consider your financial ability and willingness to continue purchases through periods of low price levels.)
Develop an investment strategy.
Your strategy will depend on a variety of factors unique to your situation, including your risk tolerance, return expectations, investment period, and investment preferences. Developing an investment strategy requires evaluating many factors, but it can give you a well-thought-out strategy to help pursue your long-term goals.
Assess your insurance needs including life, health, disability, long-term care, homeowners, automobile, and personal liability.
Over time, your insurance needs are likely to change. Insurance companies offer innovations and riders that might be applicable to your situation. Reevaluating your insurance can lead to lower premiums with coverage better suited to your situation.
Take active steps to reduce your taxes.
Reduce your income taxes in order to free money for saving. Review income tax reduction strategies now, so you have time to implement them moving forward.
Review your estate plan.
If it’s been a few years since you’ve reviewed your estate plan, take time to go over your documents to make sure they still reflect your wishes for your estate’s disposition. If you don’t have an estate plan, get one in place.
While many of these tips may sound familiar, it is the rare individual who takes advantage of all of them. The bottom line is whether you are still working or already retired, you need a sound financial plan—now more than ever-to cover your retirement income needs.
Reesa Manning is a Senior Financial Advisor at Integrated Wealth Management, specializing in retirement and income planning. For more information, call Reesa at (760) 834-7200, or [email protected]