Often when I'm at a social event I'm immediately asked what investments I like specifically, is there a particular stock I would recommend buying. While I believe that prudent investing is a very important part of reaching your financial goals, there are other key components to consider when addressing your financial goals and objectives.
Succession planning and wealth management include three primary steps:
1) Wealth and asset accumulation stage. Consider your time horizon and risk tolerance.
2) Asset protection
a. Once you create wealth, it's vital to imperative that you keep the assets protected. You can manage your risk by having proper personal and professional insurance, and incorporating your business.
b. With the guidance of a tax or legal professional, implement sound tax strategies to reduce your tax burden.
3) Income distribution (during retirement), legacy planning (passing both your personal values and assets to your family and meaningful people in your life), and charitable giving.
It is essential to prioritize your goals by level of importance and place the goals into four (4) time horizon segments. The four (4) segments are current needs, short, intermediate and long term goals (retirement). Many people use their current cash flow and count on debt to meet their short and intermediate term goals. Although taking a loan or putting money on a credit card may help make a current purchase or pay for a service, the interest charge which compounds may prevent you from meeting other future financial goals. Yes, there are certain major purchases (i. e. home or car) with an adequate down payment that require a loan. But before taking on debt, be sure that you can afford the payments and other associated expenses. Using a cash flow spreadsheet, calculate your income and expenses either on an annual or monthly basis. We created proprietary cash flow and net worth statements; feel free to contact our office to request the spreadsheets. Once you complete the analysis, you can see if you are cash flow positive or negative, and determine if you should take on added expense.
A good strategy is to have adequate cash flow to meet your current needs. Keep an emergency fund of approximately six (6) to nine (9) months of expenses, and save for the remaining three (3) segments to meet your financial goals. If possible, create a separate short term reserve for ancillary purchases. Implementing these tasks simultaneously can be done with proper planning and execution.
An excellent acronym to use when you set your financial goals is the term SMART.
?S pecific -- The goal needs to be clearly defined and described in detail.
?M easurable -- On a regular basis be sure to track your progress toward meeting your goal.
?A ttainable -- Be sure to set realistic and reachable goals.
?R elevant -- When setting your goals be sure they are specific to your needs and values.
?T imely -- It is imperative to set a specific date and timeline to meet each specific goal.
We at Vertex Wealth Management are here to help you work toward achieving your financial goals and objectives. For an initial complimentary consultation, please contact our office at (516) 294-8200 for an appointment.
Sincerely,
Michael J. Aluotto, CRPC®
Vertex Wealth Management, LLC
President
Private Wealth Manager
This article is for general and informational purposes only. This information is not intended to be a substitute for specific financial advice, as individual circumstances do vary.