A Day to Financially Reflect
Financial Awareness Day is the ideal opportunity to review your financial planning
You might not realize it, but August 14th was officially National Financial Awareness Day. It might seem like a gimmick, but it’s a good one, because it’s a great reminder to take time every year to take stock (no pun intended), review your wealth management and financial planning strategies, and make sure your financial house is in order.
With that in mind, here’s a great place to get started, with five solid tips to make sure you have a sustainable financial plan for the future:
Put away a percentage
While the exact number varies for everyone depending on their personal circumstances and financial goals, try to set aside a certain percentage of your income every year for savings and investment (30% is a great target to shoot for, with a minimum of at least 20% strongly recommended). By saving a set percentage, you’re making sure to consistently put money away in a manner that simultaneously enables to you not only save more as you make more, but also to spend more, do more and enjoy the fruits of your labor as your income increases over time.
Review your estate plan
It’s a good idea to review your estate plan at least every three years. Our personal, financial, and familial circumstances are always evolving in ways both big and small. It’s all too easy to get caught up in a checklist state of mind and tell yourself, “I’ve made an estate plan, so that’s taken care of!” Thoughtful estate planning, like all investing and wealth management decision-making, shouldn’t be a “set-it-and-forget-it” exercise. Make sure your bases are covered, your interests and your family’s interests are protected. A comprehensive plan should include foundational documents like a will, a revocable trust, and directions regarding powers of attorney (both medical and financial).
Make sure you have the proper income protection in place. In other words: review your insurance policies and determine if they are sufficiently substantive to protect you and your family in the event of accident, tragedy, or an unexpected change in health or personal circumstances. At a minimum, you should have life insurance that will protect your family’s income and lifestyle if the worst were to occur, and disability insurance that will protect you in the event that you cannot continue to work. Remind yourself that disability insurance isn’t just for those with physically active jobs. A repetitive stress injury or back problem can be debilitating, and skilled professionals like doctors and dentists should be especially mindful of the potential for disability. Lastly, consider the possibility of long-term care insurance, an increasingly popular option to reduce you and your family’s exposure to the skyrocketing costs of long-term senior and specialized care.
Make sure you are practicing prudent debt management. In general, your credit card balance should be zero at the end of each month, your student loans should be on track to be paid off within 10 years, and any business debt should be kept to a manageable level. This point is especially relevant now, given that so many people took advantage of historically low interest rates and took on a lot of debt. Debt can not only be a big source of stress but can hamper your ability to save and plan for the future.
See the big picture
Look at your financial plan holistically. That means thinking about it both in terms of what makes sense for you today, and where you want to be in the future. Put it into context by thinking critically about your goals, personal and professional priorities, and financial resources. This is even more important today, during a period of economic volatility. The market might be all over the place, but that doesn’t change your mission: to control what you can control and focus on what is important. Don’t get hung up on short-term variability. 2022 might feel important, but what does 2032 look like? 2042? As always, the goal isn’t to get rich quick, but to build wealth over time: minimize risk and get rich slowly by staying disciplined when everyone else is freaking out. As always, the best way to make sure you stay on track is to talk through these priorities with a trusted financial advisor. And if National Financial Awareness Day was what reminded you to make that call, then maybe this is a day we should all be marking on our calendars.