5 Steps to Achieving Long-Term Financial GoalsSubmitted by MIRUS Financial Partners on December 26th, 2017
How will you be able to lead the life you want? What are the steps you’ll need to take to create financial security? How can you change your life in ways that help you meet your goals and the goals you have for your family? Developing a financial plan, reviewing it regularly, and adjusting those goals as your life unfolds is one of the most effective paths to achieving your financial intentions.
Ready to get started? There are five basic steps you need to take to understand and achieve your long-term goals.
Step 1: Set Financial Goals
Clearly articulate your life goals. Think them through. Write them down. Do you want the time and money to travel? Do you have a few big “bucket-list” items you want to check off? Do you want to pay for your child’s college? Do you or your partner want to change careers? At what age would you like to retire? What do you want your life to be like after retirement? Do you want to leave a legacy for your heirs? All of these goals require financial planning.
Once your goals are clearly defined, you need to calculate how much money you can set aside to meet these future goals. There are many ways to save or prepare including a 401(k), IRAs, savings accounts, stocks, bonds, mutual funds, life insurance other investments. When it comes to long-term saving, it's important to set a dollar goal and to determine what type of approach offers the best after-tax results. A financial advisor can help you set these goals and find the best tools for reaching them. Even the best-laid plans will need to evolve over time as your life changes, so be sure to keep your financial advisor up-to-date.
Step 2: Finding Money to Save
Once you set your financial goals, it’s time to think about your current expenditures. How can you find the money to set aside on a regular basis? A close and detailed review of your monthly spending will help you determine where money can be saved. Simple ways to reduce month-to-month spending might include eating at home more, canceling less important memberships or subscriptions, repairing major appliances instead of purchasing new ones, or holding onto your car for a few extra years before purchasing a new one.
To manage income, you may want to send bonuses or overtime pay directly to savings. For some people additional training or certifications can substantially increase their lifetime earning potential, so don’t discount additional education as a financial planning tool.
If your spouse or older children don’t work, a simple way to increase income is to consider part-time or full-time employment to help defray minor expenses. Your spouse or older dependents may also want to consider job training or education to increase their own lifetime earning potential. Keep in mind that even small increases in your household’s monthly income will allow you to set more money aside, which could produce big dividends in the long run.
Step 3: Selecting the Investments to Meet Your Goals
There’s no perfect formula that fits everyone. You’ll want to factor in your age, how long you have to save for your goals, your ability to tolerate financial risk in your investments, the U.S. vs. global investments, tax implications, and the liquidity of your investments.
While many people depend on their own research to choose investments, an experienced financial advisor can be a real asset in helping you understand the sometimes complex process of analyzing and choosing investments.
Step 4: Insurance and Protection
No matter how thoroughly you plan for your future, unexpected challenges may arise. When planning for your future, and the future of your family, it's important to protect against the impact of illness or injuries that might result in lost time at work, long-term disability, or even death. Life insurance, disability insurance, long-term care insurance, and other similar programs help you minimize risk, and help you meet your goals even if your income is reduced or cut off.
Your work benefits may include life and disability insurance coverage and the Social Security system provides income replacement for long-term disability. These programs can provide some protection, but additional coverage may be needed to safeguard your overall financial ambitions.
Step 5: Regular Review Your Plan
As your financial accounts grow in value, and as your life changes, you should regularly review your progress toward your long-term financial objectives. At least once a year, you should repeat steps of goal-setting, finding and setting aside the money to invest, reviewing expenses and income, reviewing your financial protection, and analyzing your investment results. Yearly reviews may not only keep you on track, but it will also prevent any unpleasant surprises that get in the way of your financial expectations.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.