Capturing and investing savings is a critical part of planning for your future, but there’s a lot more involved when it comes to your personal finances. Ultimately, your future financial success is dependent upon a myriad of life decisions spanning all aspects of your finances. These include decisions relating to employment, housing, family, asset protection, taxes, savings, and more.
The earlier you focus on making smart financial decisions, the faster you will achieve success in your goals a year from now, 5 years from now, and ultimately approaching retirement. We discuss a number of key reasons why planning today can pay off tomorrow.
The decisions you make relating to your profession, job choices, career advancement or starting your own business have a significant impact on your future financial success. Your compensation structure directly impacts your quality of life, your ability to save, and your protections for you and your family via company-provided benefits.
Achieving your highest compensation level possible isn’t necessarily required. Ultimately, the compensation that you need is dependent upon what you want now and in the future. If your plans are lofty, chances are that your income has to be elevated too. Conversely, a more modest lifestyle could allow you to retire early. Aligning financial planning with work-related decisions can help you to better frame career choices and long-term expectations.
Budgeting and Saving
Creating and growing your nest egg is critical toward your future financial success and independence. This is true in your early 20s often until you ultimately retire. Even if you’re not yet focused on your long-term retirement planning, you still need to develop an emergency plan and begin saving for shorter-term objectives. These might include buying a car or a house, or starting a family.
There is power in saving early, perhaps more than you might imagine, even just by carving out small amounts of your paycheck every month.
Don’t forget that a key element to saving is monitoring spending. Fortunately, there are numerous technology offerings today that make budgeting easier than ever, even available at your fingertips on your phone.
Whether you’re renting, own, or are contemplating one or the other, housing is always a significant financial decision. In fact, it’s often your largest expense, making it one of the most important.
There are a lot of considerations relative to housing beyond just the monthly payment amount. These include saving for your future, the costs of ownership, transaction costs of buying and selling a home and more. Making informed and wise decisions about housing can represent one of the most significant elements of your future financial success.
Marriage and Family
Managing your finances dramatically changes when you get married or have a child. There are a plethora of new conversations and decisions to make. These can be as simple as how household accounts will work to developing and planning for long-term financial objectives.
Money is one of the primary stress points in life, and one of the most common strains on marriages. Getting on the same financial page early and continuing to make joint financial decisions can help both your marriage and your ultimate financial success.
Financial decisions also become more complex when you welcome a child into your family. There’s a lot involved in raising a child when it comes to finances. Just a few variables include budgeting for new expenses, teaching financial literacy, saving for education, and protecting your family in the event of an unfortunate life event. The earlier you focus on your finances when becoming a parent, the more prepared you will be.
If you spend the time and effort to grow your wealth, it’s important to protect it.
Unfortunately, many individuals lack various forms of insurance, or are underinsured for their own protection and those they love. Key types of insurance include life, short-term and long-term disability, long-term care, homeowners or renters, auto, and umbrella. It’s important to ensure you have coverage, and that the coverage is adequate. Planning can help to identify any insurance deficiencies. Furthermore, working with a fee-only advisor who doesn’t sell insurance helps to ensure you receive unbiased advice.
Other examples of asset protection strategies include:
- Account and entity registrations
- Identity protection
- Staying within FDIC bank deposit protection limits
- Having proper planning documents such as wills, power of attorney and health care directive documents.
For many individuals, their taxes represent their largest budget item. Opportunistic planning can help to minimize your tax liabilities, allowing you to accelerate your wealth accumulation strategies. Common tax planning decisions include:
- Deciding to contribute to a traditional 401(k) or a Roth 401(k)
- Determining if you can make IRA or Roth IRA contributions
- Exploring long-term tax benefits of a Roth IRA conversion
- Taking advantage of tax strategies in lower income years
- Tax loss harvesting
- Tax advantaged charitable gifting strategies
Comprehensive Long-Term Planning
Perhaps the most important element of achieving your current and long-term goals is developing a cohesive financial plan. This can be achieved with ongoing financial planning reviews that incorporate your life updates and evolving goals. Planning projections can help you to conceptualize the impacts of various financial decisions, helping to forge the strongest financial path possible.
When it comes to developing financial plans, they are only as worthy of the accuracy of the inputs. As a prime example, if you enter tax related items incorrectly, the planning is likely worthless. Working with a financial advisor who is capable of developing sophisticated planning and who is knowledgeable about all aspects of your finances helps to ensure that you receive quality and meaningful advice.
SageVest takes a proactive approach to investment and financial planning, ensuring that all aspects of your finances are considered. Our comprehensive approach encompasses the interwoven relationship of your finances, helping to set you a strong path toward accumulating and managing your wealth. We invite you to contact us to learn more.