At Magellan Financial we believe in the power of planning. We also know that most people don’t start seriously considering an investment plan until they enter the fifth decade of life. It is much easier to envision retirement, a concept that is hard to grasp when you are in your 30s or 40s, once you enter your 50s. And realistically, trying to pinpoint what life will look like 25 or 30 years from now is, at best, an imprecise task. So while a full-fledged plan may not be in order, that does not mean you should not be concerned about the future.
Get Your Personal Balance Sheet in Order
Many people make the assumption that planning for the future is about what you are saving, not what you are spending. That assumption is only half true. Saving for retirement and other big events it is not possible if spending is not controlled. Here are some best practices:
Maintain Reasonable Debt Levels – Do not assume more debt than is absolutely necessary.
Pay Off Non-Essential Debts – This includes credit cards as well as personal loans. If you have any outstanding high interest rate education loans, consider your ability to pay those down as well.
Develop a Household Budget – Knowing where your money is going is helpful in controlling your spending. A more detailed look at budgeting is available.
Save for the Future
For many people in this age bracket, spending and saving can become a clash of priorities. Those with children have the day-to-day expenses associated with child-rearing and the need to save for college. If you are single or married without children, spending on shopping and travel will likely compete with the need to save for the future. Here are a few guidelines you can follow:
Retirement Savings – With few people having the luxury of a pension plan, the majority of Americans will need to save for most of their post-working years. Taking advantage of workplace retirement plans, including any match and profit sharing that is available is a must do.
College Savings – This can be done in a variety of ways, with the 529 College Savings Plan being one of the more popular ways to save. A more in-depth look at college savings strategies can be found.
Event Savings – It can be for a child’s future wedding, the purchase of a new vehicle, or any other large ticket item. We suggest segregating savings for different purposes.
Protect Your Family and Yourself
Many people think of financial security in terms of investments but neglect to consider what happens if something happens to you. Here are a number of simple ways to help protect from the unexpected:
Build a Cash Reserve – A cushion of cash can help protect you and your family from short-term financial situations.
Disability Insurance – This can protect against short-term or long-term disabilities. You should consider taking as much insurance as you can through your employer. If you are self-employed, you will need to look into a private policy.
Life Insurance – For most people, a term insurance policy is relatively inexpensive and will help shore up your family’s security in case something happens to one of the adults.
Make Sure All Beneficiary Designations are Up to Date – Nothing says “I love you” like life insurance or a 401(k) going to someone other than your spouse.
Basic Estate Planning – Make sure you have a will in place, power of attorney instructions, and possibly a revocable trust. A more detailed look at the necessary documents can be found.
Invest Like an Adult
The vast majority of your savings should be invested in appropriate assets, not “fliers” or speculative investments. Monies set aside for short-term spending should be in very conservative and liquid investments. Your long-term savings should be allocated in a way that will help you meet your financial goals within your personal investment risk tolerance. You should have your accounts consolidated as much as possible, and your investment plan should include all of your assets.
It will take some time to do, but planning for your future has many benefits. Looking ahead in life will help you to protect you and your family in both good times and the not so good times. Having a team of professionals – financial advisor, attorney, and accountant – can be very helpful in making sure you have all the pieces in place.
For more information or to schedule a free review, Magellan Financial, Inc. can be contacted at 610-437-5650 or via email.
Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.
Insurance products are offered through nonbank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.
Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors. Wells Fargo Advisors and its affiliates do not provide legal or tax advice. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.