Start planning for your financial future now, waiting until your close to retirement to create a financial plan for can be a huge mistake that you may regret later in life. Even if you haven’t done much planning for your financial future yet, you can always start now. In this article, we will provide you with 5 financial planning tips that will help you achieve financial independence:
- Planning Your Finances For The Future
Having a plan in place while you are still in your 30’s and 40’s gives you a head start towards a worry free retirement. Start thinking now about what will it take to help you achieve financial independence later in life. Create a budget and spending plan that you follow and start working to pay down your debts. Living within your means is one of the easiest things that you can do to help ensure financial freedom. Educate yourself on what options are available to you for your personal financial situation. Even with a financial advisor, it is important to do your own research. Avoid purchasing costly financial products that may not be the best fit for your specific situation.
- Saving For Retirement
Time is one of your greatest assets when it comes to retirement planning. Be sure that you are contributing regularly to a 401(k), IRA, or similar retirement plan. Save as much as you can for retirement, when you get into your 50’s, 60’s, and beyond you’ll be glad you did. If you are single, it is all on you to save for a comfortable retirement, all the more reason to ramp up your retirement savings.
- Combining And Consolidating Your Accounts
Consolidate debt and find accounts with low interest rates that will help you pay down your balances. In order to plan for your future financial success it is important to have a plan in place to pay off old loans and debts. Also, start thinking about consolidating your old 401(k) accounts from previous jobs. One option is to combine them into a consolidated IRA account or roll them into your current employer’s plan. It is best not to ignore this valuable retirement asset.
- Investing For The Future
Diversifying your assets is a smart move when you are young enough to take some financial risks. There is nothing wrong with allocating a portion of your assets on riskier but more profitable investments. Perhaps there is on a start-up stock you like, a real-estate property that you see potential to flip, or an ETF that invests in a hot sector of the market. Strategically planning your financial strategy may involve allocating a portion of your funds towards riskier investments when you are young and then as you grow older that allocation percentage changes towards safer investments. It is advised to work with a financial advisor to plan out your strategy. Have an allocation plan, stick with it, re-balance your holdings periodically, and adjust your allocation as you age or if your situation warrants.
- Protecting Your Family
If you have young kids and/or a stay at home spouse you need to ensure their financial security. Term life insurance is very affordable when you are in your 30’s and 40’s, assuming that you are in good health. Life insurance is a great way to build an estate quickly that can provide for your family in the event of your death. Purchase a life insurance policy and meet with an estate planning attorney to draw up a basic will. It is essential to have a will in place that names a legal guardian for young children in the event of your death. Make sure that your beneficiaries are selected on any retirement accounts, annuities, and insurance policies. And, be sure that you update any policies when major life changes happen. You need to give some thought as to where your money and assets will go if something happens to you.
- Protecting Yourself
When you are still young, disability insurance is important. It protects you in the event you are disabled and can’t work for a period of time or perhaps permanently. Both short and long-term disability coverage is typically offered in many employee benefit packages. This type of coverage is relatively cheap and it is advised to take as much coverage as is offered. If you are self-employed or if you don’t have the option for disability coverage, look into a private policy or policies offered by professional associations.Your investment plan should take into account all of your assets including 401(k), IRAs, company retirement plans, taxable investments, and so on. If you are married this should include both of your accounts. The planning, saving, and investing that you do before you retire will pay major dividends down the road, and lead to a comfortable retirement and financial independence.