Be it the economy, war, our children, work, geopolitical tensions, or markets, Americans increasingly live with uncertainty. Much of it is beyond our control; however, your financial life need not fall into that category.
Here are nine quick tips for minimizing financial uncertainty.
1. Create and follow a formal budget. Get clear about your income, taxes, and, most importantly, where you are spending your money now. Need help? Quicken can be an excellent tool.
2. Cash is king! Reserve enough cash to get through a job loss and/or down markets. Think in terms of six to twelve months of reserves.
3. Re-assess your risk tolerance in conjunction with a detailed portfolio review. For too many people, risk tolerance assessment is a one-time event…and…that event probably occurred five, ten, or more years ago. Much has changed during the last ten years, so talk to your Wealth Manager!
4. Know your ‘number’! This is the amount of money necessary for your retirement. As with risk tolerance assessment, many of us rely on earlier analyses and projections that need to be updated. This is doubly true, because market performance has substantially diverged from long-term historical norms…and…volatility has been near record highs in recent years. Odds are your ‘number’ has changed!
5. Manage the obvious risks. A long-term disability is lurking in your future, so act now to protect your income and asset base. Disability income and long-term care insurances are readily available and often more affordable than you think…particularly if you are under fifty! Talk to a qualified Financial Advisor to learn more.
6. Minimize debt. Regardless of your situation today, make it a goal to be debt-free in 5-10 years. Debt limits all kinds of life options, pre and post-retirement.
7. Get your estate plan in order. This means an up-to-date will, financial power of attorney, healthcare power of attorney, living will, and risk management tools identified in #5 above.
8. Strike an appropriate balance between living for today and saving for your future. That balance is different for every household, but it’s important to find it. Not sure where to start? Contact a qualified Wealth Manager with financial planning experience.
9. Keep learning! Uncertainly is driven by accelerating change. What you know today may not be what you need for tomorrow. Steven Covey said, “Sharpen the saw.”
Uncertainty will always be with us. Will you be a victim…or take charge? Follow the nine steps listed above, and you’ll gain mastery over this important area of your life.
“For all of its uncertainty, we cannot flee the future.” ~Barbara Jordon