Concerned About Your Financial Future? Preparation Is the Best Protection

While recent economic and market conditions have been favorable for investors, many remain concerned about their future. According to one survey, about 70% of workers don’t feel they are saving enough money for retirement.* Another survey found that almost 50% are concerned they won’t be able to afford long-term care if they need it someday.**
By developing a financial plan, however, you may be better prepared to pursue all the goals on your financial horizon.

Manage Your Money
The initial steps of the financial planning process — calculating net worth and budgeting — don’t involve investing, but are instrumental in the pursuit of long-term goals. Your net worth, which is what you have left when you subtract your debts from your assets, is important because it shows you where you stand financially.

Once you’ve determined what you have, you need to figure out where your income is going. That’s where budgeting comes in. By tracking your cash flow you can prioritize expenses and find more money to invest for future goals. You might find, for example, that you’re spending more than you thought eating out. By bringing lunch to work each day, you might save $100 a month — money that could be invested on a regular basis.

Next, Match Investments to Your Goals
Once you’ve reviewed your financial status, you’ll be better prepared to assess your short- and long-term goals such as buying a house, funding a child’s education, or providing for retirement. So how do you plan for this spectrum of goals? Start by determining how much money you’ll need to accomplish each of them. Then develop an investment strategy based on each individual goal.

Buying a home — You’ll first need to come up with the down payment. You may want to invest in relatively non-volatile and liquid vehicles, such as money market accounts.

College — Over the past several years, tuition rates have been rising on average by 4% - 5% annually, so savings alone probably won’t cover the bills.† Consider creating a portfolio of stocks and bonds. You can tie the mix of investments to your child’s age. For example, if your child is still 10 years or more from the first day of college, more aggressive, growth-oriented investments might represent a larger share of your portfolio, depending upon your tolerance for risk.

Retirement — Many financial experts suggest you may need 70% - 80% of your final working year’s salary for each year of retirement. When you consider that retirement may last 20 years or more, you may have to go beyond your employer-sponsored retirement plan. Like your college portfolio, your retirement portfolio can be constructed according to your age, risk tolerance, and other personal circumstances.

Keep in mind, your financial plan is a work in progress. It should be updated as your life and goals change. To get started or make adjustments in your existing plan, consult a qualified financial professional.

*Source: Marketing Research Institute.
**Source: Employee Benefit Research Institute.
†Source: College Board.

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