Financial Fitness: Taking Control of Your Finances
By: C. Michael Unterreiner, ChFC – Financial Legacy Associates
Your financial needs are unique to your situation. Would you like to buy a new home? How much of your child’s college education would you like to fund? Are you planning for retirement? Whatever your circumstances, it’s important to understand your overall financial position. Most people call this financial planning; I call it Financial Fitness.
The three main steps to Financial Fitness involve:
• Understanding your current situation
• Setting and prioritizing goals
• Implementing appropriate saving and investment strategies
Understanding your current financial situation
A budget is first. If you haven’t already done this, consider establishing a spending plan. Budgeting requires you to:
• Identify your current income and expenses
• Evaluate your spending habits
• Monitor your overall spending
Your income includes not just your earnings, but also dividends and interest, child support, etc. Next, add up your expenses, classifying them as fixed or discretionary. Fixed expenses include things that are necessities, such as housing, food, transportation, and clothing. Discretionary expenses include entertainment, vacations, and hobbies. Be sure to include out-of-pattern expenses (e.g., holiday gifts, car maintenance) as well.
To help you stay on track:
• Get in the habit of saving
• Build occasional rewards into your budget
• Examine your budget regularly and adjust as needed
Setting and prioritizing financial goals
The second step to Financial Fitness is to set and prioritize financial goals. Start by making a list of things that you want to achieve, including both short-term and long-term goals.
Short-term goals may include making sure that your cash reserve is adequately funded or paying off outstanding credit card debt. Long-term goals might involve a new home, early retirement, or funding your child’s college education.
Once you have listed your goals, prioritize them. Setting priorities is important, since it may not be possible to pursue all of your goals at once. You will have to decide which goals are most important and which you may have to place on the back burner.
Implementing saving and investment strategies
After you have determined your financial goals, find out how much it will take to fund each one. Then you can focus on implementing appropriate investment strategies. To help determine which investments are suitable, ask yourself the following:
• What is my time horizon?
• What is my tolerance for investment risk?
• What are my liquidity needs?
Once you’ve answered these questions, you’ll be able to tailor your investments to help you target specific goals.
Working with a financial professional
Although you can certainly achieve Financial Fitness alone, you may find it helpful to work with a professional. In addition to the above steps, a financial professional can help monitor your plan and make adjustments as needed.
Tip: Keep in mind that unless you authorize a financial professional to make investment choices for you, a financial professional is solely there to make recommendations to you. Ultimately, you have responsibility for your finances and the decisions surrounding them. There is no assurance that working with a financial professional will improve investment results.
Financial Fitness Column provided by: Michael Unterreiner – Financial Legacy Associates
About: C. Michael Unterreiner, ChFC, founded Financial Legacy Associates to create an environment where financial professionals could serve their clients better by sharing their experiences and ideas. Since 1992, he has served his clients by recommending investment and insurance solutions to their financial planning, retirement planning, and college funding challenges. Connect with him on Facebook and Linked In for more Financial Fitness related articles and posts.
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