7 IMPORTANT STEPS TO HELP SECURE YOUR FINANCIAL FUTURE
Contributed By: Lynn A. Herald, CFA, Financial Advisor at Morgan Stanley Smith Barney
Despite the fact that the great majority of women will be in control of their household finances at one point in their lives, some women may lack the confidence or knowledge to make wise financial decisions themselves.
Although patterns are changing, a woman will generally spend more time out of the workplace, earn less and live longer than her male counterpart. With less money needing to last longer, women need to be prepared to handle all of their own financial decision-making. All the more reason to get started now---it’s never too lateundefinedor too early---to start taking an active role in your finances. Here are some important steps to consider that can help you begin to secure your financial future:
1. Start by identifying your unique goals. You should think about both long- and short-term goalsundefinedbased on who you feel financially & emotionally responsible for----and that should include yourself first & foremost!--for example, potential goals might revolve around saving for children’s college tuition or looking after aging parents’ health & welfare, to starting or expanding a business, to protecting your wealth & retiring comfortably, to supporting causes closest to your heart. In order to achieve what you want now and in the future, it makes good sense to define your major goals---and these will be unique for everyone. Then, you must prioritize and balance your goalsundefinedjust like you do everything else in your life. This means asking the tough questions that enable to distinguish between “need to have” and “nice to have”.
2. After defining your unique goals, develop a financial strategy to achieve your objectives. Obviously, your strategies are designed to support your goals, but more than that, it is a process that accounts for all the moving piecesundefinedand how they affect one another. For example, short-term “tactical” buying decisions should always be considered in the context of your broader, long-term goals. This means striking the right balance between spending & saving so you’ll have a better chance of funding all your goals.
3. Invest wisely. This means translating your financial goals, time horizon and tolerance for risk into an asset allocation & portfolio diversification strategy which has the flexibility to respond to potential opportunities, but the steadfastness to withstand market swings. Cash management and regular portfolio rebalancing are also key investment strategies to seek to enhance return potential while reducing risk.
4. Manage your liabilities. We often find that people think of liabilities as the dark side of their balance sheet. But this is not entirely fair. Used strategically, credit and lending can actually complement your financial strategies.
5. Plan for retirement. Most people think of retirement as the end game. It’s much more than that. Everyone has a different vision for retirementundefinedwhether you plan to live your life on the beach in Costa Rica or open a Bed & Breakfast. Whatever the case, your financial plan should adapt to accommodate these choices.
6. Save intelligently. This means getting a handle on spending. It means having an emergency reserve. But it also means being strategic about the vehicles and accounts you’re using to save. There is no reason why your cash can’t work as hard as your other investments.
7. Lastlyundefinedbut perhaps most importantlyundefinedis keeping your financial strategies current. Your financial plan should be revisited when your situation changes (and it will!), and on a periodic basis to take into account market changes (which will also happen!).
As you can see, a sound financial plan has many elements. A financial plan generally seeks to address a wide spectrum of your long-term financial needs, including insurance, savings, tax and estate planning, and investments, taking into consideration your goals and situations, including anticipated retirement or other employee benefits.
It may seem overwhelming but you don’t have to do this alone. A good Financial Advisor will show you how to put the components together. Your own strategy should be tailored to your needs. It may include all of these parts, or just a few of them. But it should be an integrated approach that enhances all the parts of your lifeundefinedincluding your family, your business and yourself.
Asset allocation, diversification and portfolio rebalancing do not guarantee a profit or protect against a loss. Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors do not provide tax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals are urged to consult their personal tax or legal advisors to understand the tax and related consequences of any actions or investments described herein.
* “Successful Women Invest in Themselves” Seminar J06/09
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