Feb 13, 2017

5 Steps to Achieve and Maintain Financial Wellness

By Jarrod Upton

Just as we receive an account of our physical health during an annual check-up, our financial wellness should also be examined and verified at regular intervals. And just as you might hear from your doctor – “things are fine” or “there’s room for improvement” or “there are reasons for concern” – the same kind of diagnoses can apply to your financial health.

Are you financially fit or are you a little out of shape? Are you on track to achieve your financial goals or are you falling behind? Have you maximized your 401k and IRA accounts? Are your estate plans in order? Are you saving enough or spending too much?

Conducting a regular financial review can help to achieve and maintain your financial wellness, and I’d like to provide you with five easy steps that will contribute to that worthy effort.

Establishing Financial Goals

There is a maxim that I’ve heard many times in my life that I believe bears repeating here – “If you’re failing to plan, you’re planning to fail.” At its core, this quote is confirming the value of committing to a financial plan and identifying the personal goals that comprise it.

What are your personal life goals and how can a financial plan help you to achieve them? Do you want to start a family? Buy a house or take a vacation? How important is it for you to save for retirement or have a reserve fund in case of an emergency?

These are real-life decisions that have to be made and once made, a financial plan should be constructed to help you achieve them. Unless you’re independently wealthy, all of us have to allocate the income we make and that means making choices. And every choice is a trade-off – more of one thing means less of another.

Would you rather buy a new car every few years or contribute to your child’s college education fund? Would you rather travel the world or save for a down payment on a house?

Real-life choices demand real-life answers, and real-life answers require a real-life plan. Don’t plan to fail; implementing and following a financial plan is the first step toward achieving sustained financial wellness.

Curveballs and Pitfalls

Establishing financial goals is essential in realizing financial success but let’s face it, things don’t always go as planned. Sometimes life can throw you a few curveballs or pitfalls, and then the question becomes, “Are you prepared for them?”

One important example of this is the creation of an emergency fund. In a household with a sole breadwinner or single income earner, it is recommended that 12 months worth of income be set aside to mitigate any unforeseen adversities or hardships. In a dual-income household, it is recommended that at least six months of income be set aside to cover fixed expenses.

Additionally, it is vital to make sure that sufficient insurance policies are in place as well, including life, disability and long-term care coverage.

Having the appropriate protections available to safeguard your financial wellness is often as important as the financial goals themselves.

Are Your Goals SMART?

Of course, having financial goals is great but you have to make sure they are reasonable and achievable within a realistic time frame.

A goal-development methodology that I heartily endorse is SMART Goalsetting.

The SMART acronym stands for: Specific, Measurable, Achievable, Realistic and Timely.

Using the SMART system helps you to clarify your ideas, focus your efforts, and productively use your time and resources – all of which will increase the chances of reaching your goals and ensuring your financial wellness.

Refining Saving Practices

No discussion of financial health would be complete without mentioning saving practices. The willingness and discipline to save is what will ensure success in everything we’ve discussed so far. In fact, there can be no success unless there is an understanding about the rewards and benefits that saving can offer.

Also, it is crucial to take advantage of the savings vehicles that are available to you. Are you contributing to your 401k and taking advantage of the matching funds provided by your employer? Are you making regular contributions to an IRA? Do you have funds invested in an interest-bearing savings account or in bank-issued certificates of deposit? Have you purchased any bonds or annuities to derive future income?

The practice and discipline of regular saving (as opposed to undisciplined and frivolous spending) is the lifeblood of financial fitness.

Regular Wellness Check-ups

Finally, after putting all of the above in place, it is important to maintain regular monitoring of your plan. Are you on track? Are you in need of a course correction? Have some of your goals been accomplished and if so, are new goals now in order?

Just as it is wise to have an annual physical check-up, it’s also a good idea to revisit your financial plan and make whatever adjustments are necessary at least once a year.

Some people do this in consultation with their financial advisers; others prefer to tackle it individually or as a couple. Regardless of your preferences, the willingness to put in the time to efficiently and effectively monitor your plan will go a long way to ensuring your overall financial health and wellness.

United Capital Financial Advisers, LLC (“United Capital”), is an affiliate of Goldman Sachs & Co. LLC and subsidiaries of the Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.

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