We all know the story of the shoemaker whose children went without shoes and the roofer who never got around to fixing his leaky roof. Except for the details, their stories may not be too different from our own. Despite knowing that we need to be doing something about planning for our personal financial goals – whether it is saving for retirement; doing a better job of managing our debt, or setting money aside for our children’s college education– most of us put off doing anything about it for one or both of two reasons: we aren’t sure where to begin, or we don’t think we have sufficient assets to make it worthwhile. The truth is, there is no single place to begin when it comes to planning for your financial future; and there is no level of income or assets one needs in order to make the process worthwhile. You can take action regardless of where you are in life, and regardless of how much money you have (or don’t have).
The first step is probably the easiest: identify your current and future financial goals, goals that usually include; making sure your family is protected financially at your death; managing current expenses while paying down debt; accumulating sufficient assets for retirement; and in time, leaving something to family beneficiaries. If you’re willing to develop and put into action a carefully thought-out financial strategy, those goals can be within your reach. Steps to take now can include increasing contributions to your qualified retirement plan, which decreases your income tax liability; maximizing other employer-sponsored plans, such as disability and medical plans; and a focus on saving, investing and debt elimination. This is also a good time to review your life insurance to see if it is sufficient to meet your growing family’s needs. Life Insurance pays an income tax free death benefit your family can use to replace lost income in the event of your premature death.
But you’re not done yet. There are still steps you can take that consider how your financial goals will take into account items like taxes and potential penalties. For starters, make sure you’re putting any excess cash you can into accumulation vehicles that provide either a tax deduction or which grow income tax-deferred. You may also be eligible take advantage of the tax rules which allow individuals over age 50 to set additional sums of money aside into qualified plans on a pre-tax basis.
The planning you do today can help towards building assets that will last for your lifetime, and still be able to pass assets on to your family beneficiaries in a manner of your own choosing. Now is also the time to consult with financial and tax advisors to review your will, durable power of attorney and perhaps establish a trust that can help maximize your estate and distribute your assets according to your wishes.
Working towards your financial goals is not something you accomplish just once…it’s something you keep accomplishing over the course of your lifetime – as you move through the various stages of life. But regardless of which stage you’re in when you start, the time to start is now.
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