Your Money: Improving your financial fitness
We are nearly half way through 2020 and this is a good time to get your finances in shape. You are one year closer to (or further into) retirement, there’s a lot of international market volatility, and you are bound to have some lifestyle changes in the coming year.
RECORD YOUR STARTING POINT
Begin by taking an inventory of your finances. This stage is about getting organized. When you receive year-end financial statements, keep them in a designated folder and use them as a basis for your inventory.
Create a balance sheet with your assets and liabilities. Take stock of your investments, but also unpaid medical bills, student loans. Then, look at your estate planning documents, insurance policies and real estate investments. There is more to your financial life than just the actual dollars in your accounts.
ESTABLISH YOUR GOALS
What does your ideal retirement look like? A successful retirement begins with envisioning an enriching, healthy and financially sustainable lifestyle.
Are you seeking adventure? Community? Freedom? What are your partner’s values? Do you want to retire early or work as long as possible? With a finite amount of resources, knowing the answer to these questions will help you prioritize for retirement.
CREATE A PLAN
There are several elements critical to a strong financial plan. First, write it all down; your goals, income, liabilities, everything. Make sure your plan is unique to you and that it incorporates your values. There is a lot of good financial advice out there, but if it doesn’t help you achieve YOUR goals, what good is it?
Lastly, be mindful of the time horizon. How close are you to retirement? Do you need to make changes now to meet your goals down the road? Now is the time to evaluate and re-evaluate your investments.
Your resolutions don’t do you very much good if you don’t keep them. Your goal should be to save early and often. By investing consistently, you can take full advantage of compounding interest, and insulate yourself against market swoons.
Investing just 2 percent more per year can have a dramatic impact on your retirement, especially in your prime earning years. What is more important, that $5 cup of coffee now, or a Paris vacation down the road?
MONITOR YOUR PERFORMANCE
Your finances are not a “set it and forget it” enterprise. Keep an eye on your statements and spending throughout the year. Plan ahead for potential emergencies. If your finances aren’t moving toward your goals, adjust your plans as necessary.
All of this is easier said than done, of course. Life isn’t linear. Policies change, different needs emerge, and bumps in the road are inevitable. But taking the time to plan now will ensure your finances get fit and stay fit.
Content has been modified. To read the origianl article please click here.
Bruce Helmer and Peg Webb, TwinCities Pioneer Press
11 Jan 2020