by James B. Tharin, CFA
At Emerald Asset Management, we believe the foundation to building a more secure financial future begins with a plan. But how does one get started? And how should you implement the plan? Many people find that the help of an experienced, credentialed advisor makes the experience easier to accomplish than they could do on their own. Many people also find that having a professional guide them through the process can give them the added confidence and motivation that they need to follow through on their plans.
Developing a plan requires more than just making a budget or even a wish list of future goals. Furthermore a robust financial plan should be an ongoing process as opposed to a one-time event. A plan should be a living document that is consistently reviewed and updated as people age and as life circumstances change. The EAM process is designed to do just that.
In order to develop a solid plan for your financial future, we suggest that you take the following steps:
Seek the help of a qualified professional. Investors should look for an advisor with at least ten years of experience. The advisor should also be properly credentialed. The CFA designation is widely accepted as the gold standard in the financial services industry. Click here to learn more about what it means to be a CFA Charter Holder.
Write down your goals and dreams. Remember this – if it’s not written down, it won’t happen. So many plans and ideas exist only in peoples’ minds and will never be implemented.
Make a budget. It’s so important to know what your anticipated expenses are. Your budget can be a pre-retirement budget and a post-retirement budget. Remember, with life changes come spending changes. Also, don’t forget to include known liabilities like mortgage or credit card payments or college expenses for a child or grandchild. Don’t forget that health care costs tend to increase as people age.
Make a detailed list of all of your resources. These resources should include all sources of known or likely income like social security, pension income and rental income. The list should include investment assets, retirement and savings accounts, insurance policies.
Determine the difference between your income and your expenses. Any shortfall will need to be made up by your savings and investments. Therefore you will need to develop a spending policy. There are many sound methods for developing a spending policy but those methods are beyond the scope of this article.
Determine your risk profile and a suitable asset allocation and investment plan. Everybody is different so don’t rely on old rules of thumb like ‘your equity allocation should equal 100% minus your age’. The reality is that investing is much more complicated than that. Most people need professional help to determine the best way to invest their hard earned savings to meet their goals and to stay within their risk tolerance.
Wash, rinse and repeat. Your plan should be constantly monitored just as your GPS monitors your progress on a trip. If you get off course, you need to readjust your plans and / or your investments. By monitoring your progress over time, adjustments can be made before it’s too late.
Start early – enough said!
To learn more about the EAM Process and how we can assist you with your retirement planning, contact us.