No matter where you are in your financial journey, financial security is possible—protecting not only yourself but the legacy you help establish for your loved ones. Here are some actionable steps to help you reclaim control along that path.
1. Setting financial goals
Identifying the goals that matter to you is an important and simple step to start with. These are highly subjective. They may include paying down debt, building up savings, funding education, making charitable contributions, planning for retirement, establishing an emergency savings fund, or countless other things unique to you.
You may have different sets of goals specific to you as an individual, as part of a couple, and as part of a larger family or community.
Classifying your goals as short-, mid-, and long-term is a helpful way to build momentum and see your progress add up. Use the long-term vision as a map. You need to know where you’re going—or where you want to go—to determine how to get there and what to do next.
Once you have your goals set, reviewing them periodically is also essential, adjusting as needed so that, whatever life throws your way, your goals remain in sight, manageable, and achievable.
2. Budgeting and cash flow planning
In order to help establish a budget, you need to first understand your cash flow. Are you spending more than you can afford? Are you piling up cash savings that could serve you better invested?
Come up with a system that helps you keep track of any money coming in (not only your salary but any interest, dividends, or capital gains earned, as well as occasional larger factors like selling your car or house) and any money going out (expenses of all sizes).
The difference between these numbers tells you your net cash flow. With a positive cash inflow, you are earning more than you spend. A negative cash inflow can help identify areas that need attention. How can you bring awareness to spending patterns? Where can you get creative?
Regardless of your current circumstances, it’s important to get clarity about what you’re making and what you’re spending. Once you’ve done this, you can determine a realistic budget to help get or keep things on track moving forward.
A helpful goal to work toward in your budgeting is to set aside 3 to 6 months of living expenses. This is meant to safeguard you from unforeseen challenges (eg, job loss, home or car repairs, medical bills) so that you can tackle them without going into debt.
Understanding your cash flow first will then help you determine how much to put aside in this emergency savings fund.
3. Diversifying investments
You’ve built a foundation by setting your goals and gathering information. Now, being mindful about the ways you invest will be a key to helping you reach those goals.
Like a farmer rotating crops to yield a greater harvest, diversifying your investments across different asset classes reduces risk and offers greater potential for growth. A well-diversified portfolio could include a mix of equities, fixed income, cash, and/or real estate.
This diversification is as important as the many ways you’ll tailor your financial planning to your unique lifestyle and needs. Working with a financial advisor can help you establish or diversify your investment portfolio, as part of a comprehensive road map to get you where you want to go.
Some overall advice
By breaking down your journey toward financial security into smaller steps, the entire process will be simpler, easier, less stressful, and far more manageable.
You do not have to do this all at once. Start small. Do what you can. But start now. Start where you are.
If the path feels overwhelming, just focus on taking the next step.
As always, we’re here to help! Connect with our team to learn more.
Related: 8 Steps to Feeling More Secure About Your Finances
