It is easy to go through the motions each day without giving thought to things that can dramatically impact your future and even your loved ones’ futures. Some things are simply unpleasant or even difficult to think about. Thinking about them may bring to mind unhappy thoughts, such as your lack of planning for the future or even your ultimate demise. These are a few things that are intended for a general readership to think about, and they potentially impact everyone regardless of their financial status or age.
Your Debts
Debt is unfortunately common, and it can be a huge burden to live with. Not only can it impact your regular budget and prevent you from living a lifestyle that you otherwise could afford to enjoy, but it also can prevent you from saving for the future. A smart idea is to review your current debts and to develop a strategy for debt reduction. Dave Ramsey’s debt-snowball method has proven to be an enormously successful strategy for completely eliminating debt.
Your Retirement Account
Retirement may be decades away for some or just a few years away for others. There will come a time when most individuals will stop working completely or will want to transition to part-time work. This can be monumental for your finances. Your retirement account should provide you with the ability to live comfortably for the rest of your life. This means that you need to be contributing regularly to it. More than that, you need to check its balance periodically to ensure that you are on track to retire comfortably. And again, do everything you can not to drag debt with you into retirement.
The Diversification of Your Portfolio
The amount you retire with depends first and foremost on your savings rate, i.e. how much money you save. However, once you develop the habit of saving, the next consideration is where to put the money. This is where the classic risk versus reward question becomes significant. However, risk and reward is a bit of a false dichotomy, because a great deal of risk can be mitigated through diversifying your retirement assets. This is why the traditional retirement portfolio contains a healthy mix of stocks, bonds, CD’s, money markets, and other investments.
This degree of diversification between different types of products really only matters if you plan on depleting your principle investment, which isn’t ideal. You should be retiring with enough in retirement that you can live off of the growth generated by the assets. If you can manage this, diversification should be done by spreading your money between different types of mutual funds with long, healthy track records. As long as you leave the money alone for long enough, these funds appreciate at a higher rate than other securities, without substantially increasing your risk.
Life Insurance
Life insurance can be stressful to think about. It requires you to face the reality that life will not last forever and that your loved ones may have to live without your income and financial support. Life insurance can be purchased so that their lifestyle is not negatively affected. It can be used to replace lost wages, pay off debts, send the kids to college and more.
Not all life insurance products are created equal, and there is a great deal of dishonesty in this industry. No matter what anybody tells you, never buy any package that combines insurance with a financial investment. These are horrible products akin to highway robbery or payday lending. Cash value or whole life plans are the most common example of this thievery. Stick to simple, level-term life policies. You need roughly ten times your annual income in insurance, which can be purchased cheaply with level-term. If your spouse works, a similar policy should be purchased for them. Ask about riders for your dependents to cover funeral costs if, God forbid, something should happen to them.
Estate Planning
Estate planning is also critical to consider sooner rather than later. This involves reviewing your assets and determining how they will be conveyed to your loved ones after passing. Your attorney may be able to set up trusts or take other steps to prevent your assets from being caught up in probate and to minimize the burden of estate taxes on your loved ones. You need a state-specific will set up for your estate, and once it’s in place make sure to inform your heirs specifically what’s in the will, so that any disagreements can be aired openly before you pass and grudges form.
Thinking about the future is tough, and planning for it requires effort. As you can see, there are many steps that you can and should take to prepare for the future. By focusing your attention on these areas, you will be better prepared for what may come. And once prepared, you can finally relax the little nagging feeling in the back of your mind, which will enable you to live life with a greater degree of happiness and abundance.
References
Dave Ramsey – Financial Expert
David Carrier – Portage Probate Attorney
