Jumpstart Your Financial Plan This Summer

Usually I reserve commentary like this for a January blog, as the holiday is over a New Year begins. Here we are on the other side of The 4th of July and for some we are still looking to begin our year renew our resolutions. This month I am going to review some things you should be doing now to make sure you are on the path to see so desired financial outcome becomes reality.

Review Your Goals

Take this time to review your goals and desired outcome. This is a good time to even establish some new goals. These defined goals are so important, and equally important to be put in writing and shared. Without sharing your goals, you have no accountability for staying on course. Think about it as going on a diet, if you do not tell anyone or have someone to hold you accountable for your actions, you probably will agree your destined to failed. A wealth manager serves the same purpose, he or she is someone that holds you accountable for your actions.  So if you haven’t visited with a wealth manager in a while or don’t have one, find one and remember, your advisor can not control where market index’s go, but he can serve as someone that see’s you’re on track to achieving those long term defined goals.

Get Educated

Most people do not know what to expect from their long-term investments. Education will help fulfill that void. Key is understanding how your future goal can be achieved under different investment return scenario’s. One of the functions your financial advisor/wealth manager should be assisting you with is educating you about is what investment return you need to see your goals becomes reality. Understanding, what return you need, will dictate the portfolio composition. Understand, if you can achieve your goal with a 6% return, you might not need a very aggressive portfolio, but if it going to take an 8% return to achieve your goal, you are going to either have to commit to a more aggressive investment mix, lower your goal, or push your goal down the road down the road a few years. But understanding all those variables makes you better educated to make an informed decision on how to achieve your desired outcome.

Understand the Variables

This is where the best laid plans can go array.

1.     Taxes – If one looks at the history of taxes, you will note that the highest rate of taxation ever since 1913 was 90%. Historically, the highest bracket has averaged just over 50%. Today taxes are historically low. So, when planning, you really need assume a higher tax bracket in the future then you are in today. In addition, you should be aware of the different types of accounts you have and the different tax consequences of each. Note, you cannot control future tax increases, but you can control the various types of accounts you own. I always suggest my clients own various types of accounts for retirement to create tax diversification.

2.     Inflation – This like taxes have been relatively low during the last few years. In planning we typically assume 3% inflation. But just like taxes having a high bracket of 90%, who can remember the Carter Administration and inflation at 18%. This is one reason why having at least 50 to 60% of your holdings in stock is usually a good formula for overcoming inflation.

3.     Catastrophic Events – Over the last 20 years we have seen, huge dips in the stock market. From 9/11 to Covid-19. These events test your ability to maintain your position and stay the course. In each of these events, the market has come back. This is where education and understanding your long-term perspective is so important. Never take a short-term action on a long-term goal.

4.     Health Issues – Probably the biggest hole in the plans of people I see is not preparing for the unexpected. This could mean, a long-term illness not covered by insurance, disability, or even death. In reviewing your plan, see to it that you are covered in the event of a death, disability, or a long-term care expense.

I hope this helps you understand some of the items you should focus on as you review your goals. Enjoy your summer and if I can be of any assistance please feel free to contact me even if it for a second opinion.