How to Put Your Financial Affairs in Order

Go Back

04/07/20

Crises make us see the world differently. Things that seemed important yesterday can quickly become overshadowed by fast-changing events. Conversely, parts of our lives that we might have let drift can suddenly feel like priorities.

The COVID19 pandemic and related volatility in financial markets may be causing such a reordering of priorities. In fact, for investors who find themselves unsettled by the stomach-churning events of recent months, taking some time to reevaluate their priorities could feel like something of an opportunity to be seized.

The good news is that research has shown that using specific moments in time to make a fresh start can work. The idea is to create an “old me” and a “new me” where the dividing line is a particular point in time—New Year’s resolutions are a popular example, but a crisis can also work—and then using that “temporal landmark” as motivation to correct any errors.

So if this crisis has you thinking about your financial life, consider revisiting your priorities, your resources, your goals, and your tolerance for risk. Now could be the time to assess where you are and come up with a plan for where you want to go next.

Step 1: Create a budget for life

When it comes to finances, life can be viewed as cash flowing in—and out. Saving and investing during your working years, if you stick with it, should lead to a rising net worth over time, enabling you to achieve many of life’s most important goals. Drawing up a budget and net worth statement can help you create a road map and stay on track. Here are steps that can help:

Step 2: Manage your debt

Debt is neither inherently good nor bad—it’s simply a tool. For most people, some level of debt is a practical necessity, especially to purchase an expensive long-term asset to pay back over time, such as a home. However, problems arise when debt becomes the master, not the other way around. Here’s how to stay in charge.

Step 3: Optimize your portfolio

We all share the goal of getting better investment results. But successfully jumping in and out of the market as it rises and falls is difficult and can be counter-productive. So create a plan that will help you stay disciplined in all kinds of markets. Follow your plan and adjust it as needed. Here are ideas to help you stay focused on your goals.

Step 4: Prepare for the unexpected

Risk is a part of life, particularly in investments and finance. Your financial life can be upended by all kinds of surprises—an illness, job loss, disability, death, natural disasters or pandemics. If you don’t have enough assets to self-insure against major risks, make a resolution to get your insurance needs covered. Insurance helps protect against unforeseen events that don’t happen often, but are expensive to manage yourself when they do. The following guidelines can help you prepare for life’s unexpected moments.

If you’re tech-savvy, consider storing inventories and important documents on a portable hard drive. It’s also a good idea to have copies of birth certificates, passports, wills, trust documents, records of home improvements and insurance policies in a small, secure “evacuation box” (the fireproof, waterproof kind you can lock is best) that you can grab in a hurry in case you have to evacuate immediately. Make sure your trusted loved ones know about this file as well, in case they need it.

Step 5: Protect your estate

An estate plan may seem like something only for the wealthy—but there are simple steps everyone should take. Without proper beneficiary designations, a will and other basic steps, the fate of your assets or minor children may be decided by attorneys and tax agencies. Taxes and attorneys’ fees can eat away at these assets, and delay the distribution of assets just when your heirs need them most. Here’s how to protect your estate—and your loved ones.

Taking control

We can’t control what’s in the headlines, but we can take steps to bring some order to our own affairs. On that note, here are a few suggestions for tackling your financial to-do list:

Original article By Rob Williams and found here.

Image by Free-Photos from Pixabay

 

 

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

Diversification, asset allocation, and rebalancing a portfolio cannot assure a profit or protect against a loss in any given market environment. Rebalancing may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events may be created that may affect your tax liability.

Investing involves risk, including loss of principal.

Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

Past performance is no guarantee of future results.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

Tax‐exempt bonds are not necessarily a suitable investment for all persons. Information related to a security’s tax‐exempt status (federal and in‐state) is obtained from third‐parties and Schwab does not guarantee its accuracy. Tax‐exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.

A bond ladder, depending on the types and amount of securities within the ladder, may not ensure adequate diversification of your investment portfolio. This potential lack of diversification may result in heightened volatility of the value of your portfolio. You must perform your own evaluation of whether a bond ladder and the securities held within it are consistent with your investment objective, risk tolerance and financial circumstances.

Risks of the REITs are similar to those associated with direct ownership of real estate, such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and credit worthiness of the issuer.

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.

The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC), offers investment services and products, including Schwab brokerage accounts. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides deposit and lending services and products. Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons.

This site is designed for U.S. residents. Non-U.S. residents are subject to country-specific restrictions. Learn more about our services for non-U.S. residents.

© 2020 Charles Schwab & Co., Inc, All rights reserved. Member SIPC. Unauthorized access is prohibited. Usage will be monitored.

Sharing is caring!