How to Plan Your Financial Future

People often dream of a financial future that is in direct conflict with their current reality. The question of how to plan your financial future requires specific and detailed action steps. For example, rather than having a vague idea that you want to retire comfortably, think about how much money you will need to achieve this goal. Once you have a number in mind, calculate how much you need to save each month. Next, you need to choose an investment strategy that conforms to your risk appetite and time horizon. Most importantly, you need to consult with a qualified and experienced financial planner to help you on how to plan for your financial future.

Asset Management Advice

As the name implies, asset management refers to the management of investments offered by financial planners and other financial institutions such as investment banks and university endowments. An asset manager is a, “professional who manages money and securities on behalf of a client, with the goal of growing the value of the assets.”¹ The goal of asset management advice is to increase a client’s assets over time while managing risk. Asset management utilizes both fundamental and technical analysis. Asset managers may use fundamental analysis to study anything that can impact an asset’s value. For example, any economic or political news can have an impact on the value of a security or asset. Technical analysis, on the other hand, relies on previous price and volume. In other words, asset managers may look at historical date, along with mathematical patterns, known as technical indicators, to fine tune their investment entry and exit points. To plan your financial future, I strongly recommend that you seek out the services of a financial advisor who help you identify your goals and build an investment portfolio that will help you accomplish your goals.

Investment Risk Management Strategies

Investment risk management strategies are one of those unavoidable things in investing. There are two broadly defined investor types. There are some investors who focus almost exclusively on returns and how fast they can grow their money. This type of investor is always finding ways to protect herself against the inevitability of a market correction or a bear market by using risk management strategies. For those who focus on risk, there are risk investment strategies that may be very helpful.

• One strategy to help you manage risk is to reevaluate your portfolio diversification and asset allocation. To further diversify, investors may want to think beyond stocks and bonds.²
• Another risk management strategy is known as rebalancing. The process of rebalancing is to keep a portfolio well-diversified. You see, over time, different assets have different returns or losses. This might mean that you let go of those investments that have appreciated in value while buying investments that are declining in value.
• Another risk investment strategy is to invest consistently. In other words, don’t over react if your investment is declining. If you are in this for the long-term, US Stock Markets can rise and decline over time so it’s important to understand your investment time horizon.
• You can also get an investment risk analysis. This is also known as your risk profile. Investors are generally classified as aggressive, moderate, or conservative investors. You need to know which type of investor you are.

Retirement Plan Analysis

A retirement plan analysis is quite simply an examination of your current financial plan. It is designed to determine if you are on a path to realize your goals for retirement. Part of the retirement plan analysis is to check if you have a 401(k) plan and if your contributions are on track. Other areas of a retirement plan analysis include when you can comfortably retire, your Social Security benefits, investment strategy, as well as your budget and savings. If you are asking how to plan your financial future, the simply answer is regardless of how you analyze you’re your plan, you need to start early. There was once a rule that said you need roughly $1 million to retire comfortably. In addition to the fact the $1 million is no longer what it once was, thanks to inflation, you can’t put an arbitrary number on your retirement future. A popular rule that some financial professionals use is the 80% rule. This rule simply states that, “you need enough to live on 80% of your income at retirement. If you made $100,000 per year, then you would need savings that could produce $80,000 per year for roughly 20 years.”³ The most important thing to remember about retirement plan analysis is that you need to sit down with a competent financial advisor to help you navigate this process.

Retirement Plan Advisor

One of the most important aspects of money management is the retirement planning advisor. In my other blogs, you may have noticed that I’ve always stressed the importance of consulting a retirement planning advisor. Not all financial advisors are the same, so you need to do your homework. Questions to ask potential advisors include level of education, years of experience, and the range of knowledge when it comes to retirement planning, portfolio management, experience with alternative investments strategies, and fees. Before I offer specific retirement advice, let me repeat a mantra that I tell all my clients: The earlier you prepare for retirement, the better off you will be. Retirement often creeps up on us and we find ourselves saying, “where did all the years go.” Below are, in my opinion, some concrete steps you can take:

• Monitor your investments prior to retirement and avoid overspending.
• You need to account for inflation as an inevitable fact of life. When planning for retirement, it’s advisable to plan for inflation as part of your strategy.
• While this is not an easy conversation to have, you need to talk with your spouse or significant other about retirement spending. During pre-retirement, it is critical that you both need to cut out any unnecessary spending.
• Not everything about retirement planning is about money. You need to focus on your physical health. As we get older, our physical health declines, which increases health costs. If you want to avoid sudden health costs that can potentially undermine your retirement planning, make sure you take care of your health.
• Create a budget and stick with it.
• Most importantly is that you need to sit down with a qualified and experienced professional advisor who will help you become fiscally healthy.
• Watch travel expenses during retirement. Many people dream of traveling when they retire, but that only eats away at your retirement goals. It is best to do much of your travelling prior to retirement.
• If you can work longer, you will increase your chances of having a more comfortable retirement. For example, people who retire at 70 years will get a larger Social Security check than those who retire at age 66. That’s extra money for life in your pocket.

Targeted Retirement Advice

Retirement is one of those life events that many of us procrastinate about. Statistics show that an overwhelming number of Americans are ill prepared for retirement. In fact, “64% of Americans aren’t prepared for Retirement – and 48% don’t care.”⁴ This is why you need to begin to ask the right questions and then sit down with a qualified and experienced financial planner to develop a strategy that is unique to your specific situation. Below are five factors that contribute to financial uncertainty:

• When should you retire?
• How much will I need for my retirement years?
• How much can I safely withdraw each year without depleting my investment portfolio?
• How do I provide a legacy for my loved ones?
• Will I be able to rely on Social Security benefits?
• Will my pension be able to take care of me?
• Should I plan for retirement on my own or get targeted retirement advice from a qualified and experienced financial planner?

Prepare for retirement

• One rule of thumb is that the earlier you prepare for retirement, the more comfortable you will be during retirement.
• Start saving at an early age, keep saving, and stick to your goals.
• Get to know your retirement needs.
• Some experts maintain that you will need 70 to 90 percent of your preretirement income to maintain your standard of living when you stop working.
• Contribute to your employer’s retirement savings plan such as a 40(k) plan.
• Learn about your employer’s pension plan. Make sure you are covered by the plan and understand how it works.
• Learn about how your pension is being invested.
• Most importantly is that you do not touch your retirement savings.

Financial Risk Management Strategies

Financial risk management strategies is a process of assessing, managing, and mitigating losses. This process is used by large corporations as well as financial planners to potentially minimize risk. One very important feature of financial risk management is to reduce the degree of uncertainty in investment decisions. Fund managers for large institutional investors or university endowments quantify the potential for losses as a result of investment strategies. Financial risk management strategies are connected to the concept of return on investment. For example, the degree of risk for a U.S. T-bill is close to zero while the risk for emerging-market equities is very high. The goal, of course, for fund managers and financial planners, is to minimize risk as much as possible.

Redefining Financial Literacy

One of the reasons I wrote my Amazon and Wall Street Journal best-selling book, Redefining Financial Literacy, was to shed light on the financial literacy problem in America. When you consider that only six states require high school students to take a standalone personal finance in order to graduate, you start to realize the magnitude of this problem. An additional 15 schools only require that financial coursework is integrated into another course.⁵ My point is that both the federal government and the states need to be a better job of preparing young people for the complex financial world. Another reason I wrote my book was to broaden our understanding of financial literacy. This is why I redefined financial literacy in terms of the hidden political and economic forces that impact your investment decisions. In addition to offering advice for retirement, I also revealed my mullti-asset class investment portfolio, known as the REALM model, which can potentially offer you robust returns while managing risk.

The REALM strategy contains Alternative Investments which are speculative by nature and have various risks including possible lack of liquidity, lack of control, changes in business conditions and devaluation based on the investment, the economy and or regulatory changes. As a result, the values of alternative investments do fluctuate resulting in the value at sale being more or less than the original price paid if a liquid market for the securities is found. Alternative investments are not appropriate for all investors. No investment process is free of risk, no strategy or risk management technique can guarantee returns or eliminate risk in any market environment. There is no guarantee that this investment model/process will be profitable. Diversification does not guarantee profit nor is it guaranteed to prevent losses.

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1. Brian O’Connell, “Asset Management: Get the Expert Help to manage your Money,” Forbes, March 12, 2021. https://www.forbes.com/advisor/investing/what-is-asset-management/

2. SoFi Learn, “6 Investment Risk Management Strategies,” sofi.com, September 10, 2020. https://www.sofi.com/learn/content/investment-risk-management/

3. Julia Kagan, “Retirement Planning,” Investopedia, April 11, 2021. https://www.investopedia.com/terms/r/retirement-planning.asp

4. Sean Dennison, “64% of Americans Aren’t Prepared for Retirement – and 48% Don’t Care,” yahoo.com, September 23, 2019. https://www.yahoo.com/now/survey-finds-42-americans-retire-100701878.html

5. Tim Ranzetta, “How Many States Require Students to Take a Personal Finance Course Before Graduating from High School? Is it 6 or is it 21?” ngpf.org, February 12, 2020. https://www.ngpf.org/blog/advocacy/how-many-states-require-students-to-take-a-personal-finance-course-before-graduating-from-high-school-is-it-6-or-is-it-21/