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Twelve Months of Financial Milestones Working with Financial and Legal Advisors Taking Control of Your Financial Future How Much Money Will
I Need to Achieve How Should I Manage
My Money to Reach Determine Your Net Worth and Cash Flow
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taking CONTROL
OF YOUR FINANCIAL FUTURE
Once you’ve achieved a positive net worth, positive cash flow, and a comfortable emergency fund, you’re ready to develop an overall financial strategy. Think of your financial strategy as a roadmap to the future that shows the paths you will take to reach your long-term goals. Your strategy should include: • A statement of all your financial goals, what they will cost, and when you want to achieve them. • Your risk profile, which is how much risk you are comfortable taking with your money to reach your goals. There is a risk/reward trade-off in all financial products and services. Generally, the higher the potential risk, the higher the potential reward, or return on your money. However, there also is a possibility of not taking enough risk to make your money grow sufficiently to put a child through college, for example, or provide a secure retirement. • The mix of stocks, bonds, and cash products you want to own. This mix, called asset allocation, is expressed as a percentage; for example, you might decide to hold 50 percent stocks, 40 percent bonds, and 10 percent cash. Many experts believe asset allocation is more important to your overall financial success than the specific investments you choose. • Your investment preferences and how you will make decisions about what to buy and sell in your portfolio—and when. For example, you might prefer mutual funds over individual stocks, or you might not want to invest in certain industries. You might buy mutual funds regularly and sell shares when the price is up a certain percentage. • How often you will monitor your plan to track progress and make any necessary adjustments. Once a year is the absolute minimum; quarterly is usually sufficient.
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Adopt and Stick with a Financial Strategy
