3 Easy Steps to Design Your Financial Strategy

8/29/2016 9:30:00 AM

3 Easy Steps to Design Your Financial Strategy

The prospect of developing and adhering to a financial strategy can be overwhelming. However, it does not have to be so complicated. Consider these steps:

  1. Measure your current financial status with a personal balance sheet.
  2. Identify and quantify your financial objectives, such as retirement, college funding, reducing taxes and accumulating an estate to pass to heirs.
  3. Identify the steps needed to help you reach those objectives.

Here are some other points to include in your financial strategy. 

  • Sensible spending.
    Prepare a household spending worksheet to see where you spend and where you may be able to save. 
  • Prudent borrowing.
    Loans for things that provide lasting value (for education, homes or autos) are smarter than borrowing for short-term gratification (extravagant vacations or expensive jewelry).  Prudent borrowing includes getting attractive rates and terms. Before borrowing (whether it is a credit card, auto loan, mortgage or other loan), make sure you understand all the terms, including the interest rate, length of loan and method of calculating interest. Use our free and helpful Mortgage and Loan Calculators
  • Consistent saving.
    Use a payroll deduction or automatic savings program.  They are convenient and usually more successful than trying to save on a less regular basis. Find one that fits your budget and meets your long-term needs. 
  • Wise investing.
    Investments come with risks and hopefully higher returns to compensate for those risks. Diversification, asset allocation (dividing funds into stock, bond and cash investments) and investment costs should all be considered as part of a wise investment strategy. Ask your Personal Banker how we can help you maximize your money by meeting with one of our retirement planning experts.
  • Adequate protection.
    Review your insurance coverage periodically (homeowners/renters, health, disability, auto and umbrella policies). Make sure you have the right combination of coverage and deductibles. If you use insurance primarily for "catastrophic" coverage, remember that higher deductibles mean lower premiums.

    Evaluate how much life insurance you really need. If your family would need significant funds to replace your income, a larger policy may make sense. If you are single, perhaps a smaller policy (and smaller premiums) will be sufficient. Also, compare the benefits and costs of term and whole life policies. For younger, healthy individuals without a need for permanent protection, a term policy may be a better choice. 
  • Use a qualified advisor.
    If you want or need help, find an investment professional, insurance agent, financial planner, or credit counselor who is knowledgeable, trustworthy and someone you can comfortably work with to develop a plan that’s right for you. Do your homework. The more knowledgeable you are, the better you will be able to evaluate recommendations. 

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