October is Financial Planning Month. And now that you know it’s Financial Planning Month (just in case you didn’t know before), why not take the opportunity to determine if you’re on the right path toward meeting your financial goals?
Consider taking these steps:
- Identify your goals. To know if you’re making progress toward your goals, you first have to identify them. Of course, you’ll have a variety of goals in life, such as helping pay for your children’s college educations. More than likely, though, your most important long-term financial goal is to build enough resources to enjoy the retirement lifestyle you’ve envisioned. But we all have different ideas for how we want to spend our retirement years. Some of us may want to stay close to home, volunteering and pursuing our hobbies, while others want to visit the vineyards of Bordeaux or explore the pyramids of Egypt. So, name your goals and, as much as possible, put a price tag on them. Once you know about how much your retirement is going to cost, you can create an investment strategy that may ultimately provide you with the income you will need.
- Don’t underestimate your cost of living. Even after you’ve identified some of your retirement goals, and estimated their costs, you still haven’t developed a complete picture of your future cost of living. You also need to take into account other potential major expenses, such as health care. Once you’re 65, you’ll get Medicare, but that won’t cover all your medical costs – and it might cover only a tiny portion of those expenses connected with long-term care, such as a nursing home stay or services provided by a home health aide. A financial professional can help you explore specific methods of dealing with these types of long-term care costs.
- Locate “gaps” – and work to fill them. After you’ve had your investment strategy in place for a while, you may see that some “gaps” exist. Is your portfolio not growing as fast as it should to help you reach your goals? If not, you may need to review your asset allocation to make sure it is aligned with your risk tolerance and portfolio objective. Do you find that you own too many of the same types of investments? This over-concentration could be harmful to you if a downturn affects one particular asset class, and you own too much of that asset. To help prevent this from happening, be sure to diversify your dollars across a range of investment vehicles. Keep in mind, though, that diversification can’t guarantee a profit or protect against all losses.
- Protect yourself – and your family. Saving for your ideal retirement is certainly a worthy goal, but you have other ones – such as providing for your family in case you aren’t around, or if you become ill or incapacitated and can’t work for a while. That’s why you will need adequate life insurance, and possibly disability insurance, too. Your employer may offer you both these types of coverage as an employee benefit, but it might not be enough – so you may want to explore private coverage as well.
Financial Planning Month will come and go. But by following the above suggestions, you can create some strategies that will bring you a lifetime of benefits.