With the end of the year approaching, now is an excellent time to evaluate your finances, and what can be done to improve them. We’ll cover 5 items that you should consider below.
#1: Update Your Budget.
Without a budget, you can’t establish a solid financial base. This tip may seem simple, but it’s worth emphasizing: Look at your cash flow. Be clear on where your income is going each month. Those misplaced dollars can quickly add up to more than you realize.
You can use the savings to pay off credit cards or other debt as a result. Every dollar that you save in interest charges is one more dollar that you can invest in the future.
#2: Review Your Goals and Reprioritize as Necessary.
Without a financial destination, you have no goal, no idea how much to save, or what makes a good investment for your situation. Ask yourself:
What are my financial priorities? What are my short-term and long-term goals?
Is any budget category consistently over?
When is the last time I looked at my investments or reviewed my insurance policies?
Life events that should prompt you to reassess risk tolerance include marriage, divorce, career changes, and retirement.
#3: Build or Rebalance Your Portfolio.
Choose investments for your portfolio that match your strategy. Mutual funds and ETFs make this easier by providing automatic diversification, professional management, and potentially lower costs. When building or reviewing your portfolio, look at all of your assets together. Think beyond one particular account and focus on how your entire investment portfolio is constructed.
You should revisit your allocation and rebalance your portfolio at least once a year. If the stock market has been performing well, eventually you'll end up with a higher percentage of your investment dollars in certain stocks than you initially expected.
#4: Determine Your Retirement Income Needs.
Use your current expenses as a starting point, but note they may change dramatically by the time you retire. A realistic estimate of your costs improves the closer you get to retirement.
If you’re nearing retirement, the gap between your current expenses and your retirement expenses may be small. If retirement is many years away, projecting your future expenses may be more difficult.
Once you determine your retirement income needs, take stock of your estimated future assets and income. If estimates show that your future assets and income fall short of what you need, the rest needs to come from additional personal retirement savings.
#5: Invest Extra Income.
Investing extra income may seem like a no-brainer, but for many, the idea of investing is intimidating. In truth, there’s nothing too complicated about common investing techniques, and the hardest part of investing is getting started.
Everyone has a different ideal retirement, but their reasons for investing are mostly the same. It’s about managing your money to provide a comfortable life and financial security for you and your family. We offer a free portfolio review to assess many of the discussion points reviewed. If financial improvement is a priority in your life, you owe it to your future self to give us a call today.