Once a year, I always take a snapshot of our personal finances by noting our accomplishments and revising our goals and aspirations for the upcoming year. For instance, if we decide to take a ski trip to Colorado this year, we need to balance that aspiration with saving for retirement and other priorities.
I believe revising goals on an annual basis is a crucial step in the financial planning process and recommend that you do the same.
When reviewing your goals, ask yourself the following questions:
* Have you paid off your credit card debt? If not, are you paying more than the minimum balance?
* Do you have 3-6 months of living expenses in savings?
* Have you calculated how much money you need for retirement or for your children’s college expenses? If so, how much money do you need to invest each
month?
* Are you investing at least 10% of your income into taxable, tax-deferred and tax-free investments?
* Have you calculated the cost you and your family will pay when you die, or if you become disabled or need long-term care?
* If you do not have disability or long-term care insurance, how long will your investments last given the additional financial burden? Do you know the
average cost of home health care, assisted living, or nursing home care?
* Will you have enough money to continue to live your current lifestyle? If not, how will you and your family adjust to this change?
If you can honestly check off each point above, by all means stay the course. But if you are like most people, you need to reexamine your game plan and make some adjustments.
I suggest the following simple process to help you to achieve your goals:
1. Update your goals and categorize them into two areas: Professional and Personal
2. Prioritize your goals by answering the question:
What needs to happen in the next 1-3 years, both personally and professionally, for you to feel happy about your progress?
Your answers will be your top priorities for 2014.
3. For each goal, write down:
* Dangers: What could interfere with you reaching your goal?
* Focus: Where should you focus your energy to get the best results?
* Strengths: Focus on your strengths. Spend your time on activities you enjoy and delegate tasks you do not enjoy.
4. Write down what you are going to do every week to reach those goals.
For example, if you want to contribute $6,000 this year to your savings, write down that you will contribute $500/month into a savings account and submit the EFT form to start the draft this month. Be very specific on what you are going to do each week to accomplish each goal.
After you complete this exercise, you will have the beginnings of a plan in place for this coming year. Whether you work with me or another financial advisor, going through this process will make planning easier because you will know exactly what you want to accomplish.
If you would like to schedule a complementary financial review of your finances, please call me at 301-588-0514 or email jim.musgrave@rfsadvisors.com.
I look forward to hearing about your plans for 2014!
Sincerely,
James C. Musgrave, CRPC
Direct Line: (301) 588-0514
9600 Blackwell Road, Suite 101
Rockville, MD 20850
