Broker Check
Are You Set Up To Invest (The Planning Way)?

Are You Set Up To Invest (The Planning Way)?

April 08, 2020

Whether we are in a bull market or a bear market, there are several important steps you can take to set yourself up better from a financial planning standpoint!

Step 1 – AFTER TAX INCOME > THAN YOUR EXPENSES – always try and ensure your monthly after tax income is greater than your monthly expenses.
**TIPS: To increase income work harder, smarter, or find secondary sources. To reduce your expenses – outline an honest budget, identify areas of luxury you can cut slack from, or items you may be able to reduce cost on via researching competition. If you are already in retirement, keeping SS and Pensions over expenses, if possible, makes life a lot less stressful. If you need to take distributions, consult with an advisor on what are reasonable distribution rates for the long-term.**

Step 2 - EMERGENCY FUND GOAL – always make sure you have at least 3 to 6 months’ worth of expenses on hand.
**TIPS: If you are a naturally conservative person, or you have special expenses coming up, you may want to ensure you keep an even greater deal of cash on hand!**

Step 3 – DETERMINE YOUR INVESTING GOALS, YOUR TIME HORIZONS, AND BACK INTO YOUR RISK LEVELS – what are your goals for investing? How long are you going to need to invest for? Are you investing to fund future purchases? Are you investing to creating future places to distribute monthly or annual income? Are you investing for a short period of time, in-between, or for your lifetime?
**TIPS: It is always easier to start with what your goals and your times horizons are, and then to back into your appropriate risk levels. It is hard to know what the appropriate risk/return scenario is if you don’t know what the purpose or length of time is.

Step 4 – INVEST WITHIN YOUR GOALS AND RISK LEVEL – make investments and build portfolios that fit your goals at appropriate risk levels for those goals.
**TIPS: You may have different lengths of goals – you can bucket your money in different investments or risk-based portfolios to meet these goals!

The better you plan for Steps 1, 2, and 3 – the easier it is to remove emotions when you get down to your investments/portfolios in step 4.
If you are always able to maintain the lifestyle you want to lead, have emergency funds, and understand your financial plans – you shouldn’t be so concerned about day-to-day, week-to-week, or month-to-month returns on your investments.
You should stay focused on your goals for the longer term future!