Happy New Year!
This could be THE year — the year you will finally get your financial life under control and organized to your satisfaction. Your financial matters could already be in fine shape, but a little tweak here and there never hurt. Or your financial matters could be in total disarray and in need of a major overhaul.
Stephen Covey tells us to “begin with the end in mind.” So wherever you are on this continuum, the ideal would be to have peace of mind and confidence about your financial future or at least to know what you need to do to make it better. So here are ten steps to get you on your way.
Visualize — consider your values
Your values are what make you who you are. So the first step in this journey involves taking stock of yourself. Consider your values and what is important to you in your life. These are the intangible, emotional rewards in life that capture our hearts. What do you envision or dream about? What makes your heart go “zing?” Love of family and friends, good health, sharing experiences, peace of mind, security, faith, giving and helping others are a few values that might come to mind.
Conceptualize — set goals
Goals are what you aspire to achieve that will help you fulfill your values. These are the tangible, measureable, visible rewards that we can work toward that make the realization of our values possible. Goals could be owning a home, being on track for successful retirement, starting a business, college for your children or grandchildren, extensive travel or supporting a neighborhood shelter.
Organize– where am I now?
Gathering the necessary data could be the most difficult part for you. It is essential to have your current financial statements, tax returns and legal documents together. You will need to develop a balance sheet showing all assets, all liabilities and your net worth. Then draw up an income statement that outlines all of your income and cash outflow and your resulting net income. For some, just getting through this step knowing what you have and how much your monthly expenses are could give a great sense of accomplishment.
Stabilize — build a firm foundation
Being able to take care of recurring obligations will put your mind at ease. Strive to grow and maintain an emergency fund to cover those expenses for at least a few months. Review your liabilities to determine if you could re-finance any loans, lower rates or even pay down balances. Examine the adequacy of your life, health and property insurance policies to assure they will fulfill the needs intended should the need arise. Make sure your basic legal and estate planning issues are addressed. You should have at least a will or trust in place with guardians appointed for children. Your attorney can assist you with other documents that assure your finance and health care decisions will be taken care of in event of the need.
Prioritize — plan your goals
Review your list of goals and decide which are short term and long term and attach dates to their achievement. Although some goals might be reserved for the future, it is said that a goal without some type of timeline is just a wish. You might choose significant dates like birthdays, anniversaries or special holidays.
Strategize — assess your needs
How much will you need to reach your goals? What resources do you have now and do they have the potential to grow to meet your goals? It is advisable to determine your risk tolerance level before committing to an investment program. Remember the SWAN level of risk tolerance; You want to Sleep Well At Night. You might need to add regular, periodic amounts to your investments depending upon your goals.
Capitalize — implement your plan
With your goals in mind, your risk tolerance in check and your money in hand, it is time to choose investments earmarked to achieve your goals. It is possible that some of your investment planning will fulfill certain values you have, like being socially responsible or helping others through charitable gift planning. You might choose separate accounts for each goal if this inspires you to stay on target.
Optimize — monitor your plan
Be vigilant, paying close attention to assure your investment plan is working according to plan. Market conditions could make it advisable for you to reassess your risk tolerance and perhaps tweak the allocation of your investment assets.
Realize — adjust goals as needed
Life happens! Your priorities and goals might change along the way. Life is a dynamic process. However, if over time you have been able to grow your assets in anticipation of achieving your goals and fulfilling your values, you will have the ability and flexibility to flow with the changes life has to offer.
Formalize — preserve your estate and distribute wisely
Become familiar with various financial life planning arrangements that can maximize the value of your assets that transfer to your family members and favorite charities, either now or in the future.
At the time this article is being written (condensed from a seminar I conduct), Congress is hammering out tax law changes that in all likelihood will be in effect by the first of January, 2011, thus the information is intentionally generic. Please consult your personal professional advisor for more information.
This could be THE year — the year you will finally get your financial life under control and organized to your satisfaction. Your financial matters could already be in fine shape, but a little tweak here and there never hurt. Or your financial matters could be in total disarray and in need of a major overhaul.
Stephen Covey tells us to “begin with the end in mind.” So wherever you are on this continuum, the ideal would be to have peace of mind and confidence about your financial future or at least to know what you need to do to make it better. So here are ten steps to get you on your way.
Visualize — consider your values
Your values are what make you who you are. So the first step in this journey involves taking stock of yourself. Consider your values and what is important to you in your life. These are the intangible, emotional rewards in life that capture our hearts. What do you envision or dream about? What makes your heart go “zing?” Love of family and friends, good health, sharing experiences, peace of mind, security, faith, giving and helping others are a few values that might come to mind.
Conceptualize — set goals
Goals are what you aspire to achieve that will help you fulfill your values. These are the tangible, measureable, visible rewards that we can work toward that make the realization of our values possible. Goals could be owning a home, being on track for successful retirement, starting a business, college for your children or grandchildren, extensive travel or supporting a neighborhood shelter.
Organize– where am I now?
Gathering the necessary data could be the most difficult part for you. It is essential to have your current financial statements, tax returns and legal documents together. You will need to develop a balance sheet showing all assets, all liabilities and your net worth. Then draw up an income statement that outlines all of your income and cash outflow and your resulting net income. For some, just getting through this step knowing what you have and how much your monthly expenses are could give a great sense of accomplishment.
Stabilize — build a firm foundation
Being able to take care of recurring obligations will put your mind at ease. Strive to grow and maintain an emergency fund to cover those expenses for at least a few months. Review your liabilities to determine if you could re-finance any loans, lower rates or even pay down balances. Examine the adequacy of your life, health and property insurance policies to assure they will fulfill the needs intended should the need arise. Make sure your basic legal and estate planning issues are addressed. You should have at least a will or trust in place with guardians appointed for children. Your attorney can assist you with other documents that assure your finance and health care decisions will be taken care of in event of the need.
Prioritize — plan your goals
Review your list of goals and decide which are short term and long term and attach dates to their achievement. Although some goals might be reserved for the future, it is said that a goal without some type of timeline is just a wish. You might choose significant dates like birthdays, anniversaries or special holidays.
Strategize — assess your needs
How much will you need to reach your goals? What resources do you have now and do they have the potential to grow to meet your goals? It is advisable to determine your risk tolerance level before committing to an investment program. Remember the SWAN level of risk tolerance; You want to Sleep Well At Night. You might need to add regular, periodic amounts to your investments depending upon your goals.
Capitalize — implement your plan
With your goals in mind, your risk tolerance in check and your money in hand, it is time to choose investments earmarked to achieve your goals. It is possible that some of your investment planning will fulfill certain values you have, like being socially responsible or helping others through charitable gift planning. You might choose separate accounts for each goal if this inspires you to stay on target.
Optimize — monitor your plan
Be vigilant, paying close attention to assure your investment plan is working according to plan. Market conditions could make it advisable for you to reassess your risk tolerance and perhaps tweak the allocation of your investment assets.
Realize — adjust goals as needed
Life happens! Your priorities and goals might change along the way. Life is a dynamic process. However, if over time you have been able to grow your assets in anticipation of achieving your goals and fulfilling your values, you will have the ability and flexibility to flow with the changes life has to offer.
Formalize — preserve your estate and distribute wisely
Become familiar with various financial life planning arrangements that can maximize the value of your assets that transfer to your family members and favorite charities, either now or in the future.
At the time this article is being written (condensed from a seminar I conduct), Congress is hammering out tax law changes that in all likelihood will be in effect by the first of January, 2011, thus the information is intentionally generic. Please consult your personal professional advisor for more information.