Many Americans have a certain vision for their financial future, but not a clear path for how to achieve their goals. We all know we want better credit and enough money to retire, but financial stability extends well beyond that.
Do you have a savings plan? Are you prepared for financial emergencies? What about college for your kids?
Whether you are a novice when it comes to counting your coins or an experienced investor, there are always steps you can take to take control of your financial destiny. You don’t necessarily need a professional financial planner to do so, say some experts.
“Many individuals are quick to hand over responsibility for their future to financial advisors and fund managers in the hopes of achieving better returns than they could on their own,” says Dale Gillham, an analyst, financial educator and author of Accelerate Your Wealth: It’s Your Money, Your Choice. “If you’re looking for the best person to handle your investments without any conflict of interest, look no further than yourself.”
While that may work for some who are financially savvy, others will work better with the guidance of an expert — especially when it comes to long-term financial goals. But either way, we all need to empower ourselves with basic information to reach our desired financial levels.
Here are seven basic tips to help you tackle your finances.
Set a specific goal
Setting goals may boost your confidence in achieving them. According to Lincoln Financial, those who set a financial goal for themselves in 2017 were more likely to feel that their finances had improved over the course of the year, compared to those with no financial goal. Whether it’s saving more for retirement, paying off a debt or investing in stocks, setting a goal is a great place to start.
Make a plan
Having a financial plan in place can help you prepare for life’s surprises and face them with confidence. A financial plan doesn’t need to be complicated, but it should cover everything that’s important to you at this specific stage of your life.
A financial advisor can provide an objective voice to help you stay focused on your goals while balancing your risk preferences and time horizon. They can also provide education to help determine when to fine-tune your plan. If you already have a relationship with an advisor, schedule time to review your plan and make any necessary adjustments.
Build your investment portfolio
“Investing is less complicated than you might realize,” says Gillham. “With some simple knowledge of proven strategies, you can build wealth on your own.” This includes managing a portfolio of five to 12 stocks which is easier to manage and represents lower risk.
Consider multiple sources of protected lifetime income
According to Lincoln Financial, 82 percent of pre-retirees are concerned about what will happen to their investments if the market drops. Build diversity into your retirement income plan by incorporating different sources of lifetime income in addition to Social Security. Do you have a pension? Have you considered incorporating an annuity as a portion of your plan?
“Diversifying your portfolio to include a source of protected lifetime income, like an annuity with optional benefits, can help to safeguard savings and provide for predictable income in your retirement,” says John Kennedy, head of Retirement Solutions Distribution, Lincoln Financial Group.
“Never invest more than 20 percent of your total capital in any one stock,” he adds.
Build an emergency fund
If you’re a regular reader of Money Matters, then you should know by now that 40 percent of adults in the U.S. are unable to cover a $400 emergency expense. So, setting goals, without planning for a rainy day will get you nowhere fast. Instead of just planning to make it through a financial crisis, most experts advise saving up at least three months of living expenses in case of job loss or unexpected expense.
Recent changes in tax laws have some concerned about how taxes will impact their finances and retirement income this year. Discuss tax-smart strategies with your advisor to help increase your income and keep you on the right track.
Do your research
No matter how good your financial expert is or how much you think you know about finances, make it a priority to stay on top of financial trends and changes. Follow websites like BlackEnterprise.com and NerdWallet.com for up-to-the-minute news and find books that address your needs.
The key to financial success is staying focused on your goals and working with a plan. If you don’t choose to connect with an expert, make sure to research and set clear strategies for your success.
Information provided, in part, by StatePoint.