Happy National Financial Planning Month
WITH LESS THAN THREE MONTHS UNTIL THE END OF 2021, IT’S AN IDEAL TIME TO BEGIN STRENGTHENING YOUR FINANCES.
And to help provide motivation, October is Financial Planning Month, a 31-day check-in to see that your finances are aligned to help you work towards your financial goals.
During this month, review and assess the following key areas associated with financial wellness:
Develop a financial plan that lays out clear goals and timelines. Make a reasonable and practical budget, assessing your income and expenses to understand your cash flow, identifying areas where you can trim costs. Revisit and revise your budget regularly to make sure it aligns with your personal circumstances.
Plan for an emergency
Expected unexpected expenses, such as a medical emergency, major car repair, and an appliance replacement, establishing an emergency fund that can pay for these costs. At a minimum, save at least three months’ worth of living expenses in the fund, in case you lose your job.
Check your credit report periodically, making sure that there are no errors, while using it as a tool to make sure that you’re paying your bills on time and staying within your established credit limits. Such actions will help increase your credit score. NOTE: You are entitled to a free copy of your credit report annually from the three major credit reporting companies, Experian, Equifax, and TransUnion.
Investments increase faster with early contributions
Invest early and often, as a small recurring investment over a long period of time has the potential to produce greater returns than investing a larger amount over a shorter period of time.
For instance, if you invest $75 a month beginning at age 25 and continue until you are 65, your earnings will be greater than the 35-year-old who invested $100 a month until reaching 65 (assuming an equal rate of return for each). This is a hypothetical example and is not representative of any specific investment. Your results may vary.
Focus on your bottom-lines
Review your spending habits, assessing any areas where you are spending more than budgeted. Revise your budget if these are truly under-represented categories; otherwise, try to trim those expenditures. Additionally, consider whether there are areas where you are spending less than budgeted. If so, consider allocating the savings to an emergency fund or retirement account.
Are you saving for retirement? To help guide your strategy, access an online retirement calculator, which recommends how much you should be saving each year, based on your projected retirement age and goals.
Additionally, review your retirement accounts to gauge their growth. You can also access an online database to determine if you are eligible to receive any unclaimed retirement or 401(k) funds from a previous employer.
If you’re merely saving but not investing your earnings, you may not be generating an optimum return. Indeed, many Americans are unable to retire on their savings alone, living instead off their accumulated earnings from their investments.
To help you assess your finances and savings strategy during National Financial Planning Month or at any time of the year, consult a financial professional, who can develop a plan that aligns with your personal circumstances and goals.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
This material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
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