During challenging economic times, many new Premier clients say they've come to us because they've pulled away from traditional investment strategies and began to react to every market whim and event.
This course of action rarely, if ever, works. There are no quick or easy gimmicks to financial success. There are, however, clear steps you can follow to assess where you are today and set you on a course of action to improve your comprehensive financial plan -- and move toward success.
1. Set financial goals.
Establish short-term, intermediate, and long-term wealth planning goals. Include specific dates and dollar amounts and measure your progress periodically. If you don't know where you want to go, you won't know when you get there.
2. Create a budget.
Budgeting is your road map to financial success. Far from being restraining, a budget can actually give you more control over your finances. Even those “small” expenditures can add considerably to your total expenses. Putting a budget in place can help you start putting your money to work for you rather than being controlled by it and falling short of your financial goals.
3. Automate your savings and investments.
The more you automate the funding of your savings and investment accounts, the less likely you will stop contributing when times are tough. You'll also benefit from lower prices when the stock market is down.
4. Use credit wisely.
Credit card debt is the number one obstacle to getting ahead financially. Purchasing on credit can be costly, and having too much debt can get you into financial trouble.
5. Use insurance wisely.
While it’s important to have the necessary health, disability and life insurance coverage, overdoing it in these areas can also be costly. Often people are talked into buying insurance coverage they don't really need, such as buying whole life policies when term life is adequate. To avoid this scenario, seek advice from a fee only wealth advisor who is not paid commissions from these types of products.
6. Understand risk and accept it.
Many of the financial disasters of the past decade were related to investors taking on too much risk. Understanding how risky an investment is can be tricky, so it's important to get advice from an impartial wealth advisor.
7. Don't ignore plain old common sense.
Timeless advice, such as: diversify your portfolio, pay attention to risk, keep your expenses under control, and reinvest the earnings of your portfolio never go out of style. Following the old adage “If an investment sounds too good to be true, it probably is,” would probably have kept people away from many recent financial disasters, such as investing with Bernie Madoff. Be sure to ask questions and get a second opinion about any major investment so that you understand the risks as well as the benefits.
8. Maximize your employment benefits.
Employee benefits, such as 401(k) plans, flexible spending accounts and medical and dental insurance can be a significant help to you in achieving financial success. Make sure you are taking advantage of the benefits that can save you money by reducing your taxes, allowing for employer matching contributions, or helping you to reduce out-of-pocket expenses.
9. Create or update your estate plan.
Seventy percent of Americans have no will or estate planning strategies in place. You can protect your loved ones as well as your assets by clearly defining what should happen with your estate when you die.
10. Become an informed investor and consider hiring professionals for advice.
If you are managing your portfolio yourself, are working with an investment professional without much guidance, or just lack confidence in your current investment portfolio or overall financial strategies, it may be time to search for an experienced Certified Financial Planner ™. Interview several advisors to see if their investment views match yours.
It is possible, on your own, to set a course for your financial future by employing the first nine steps on this list. That said, we feel that for many investors, Step 10 proves to be the element that separates an adequate investing experience from an exceptional one.