Every year brings new avenues and possibilities onto the horizon. 2017 will undoubtedly be an interesting year with the many changes the world is constantly going through such as the new President-Elect, Donald Trump, stepping into office. The future is uncertain as it has always been and while it may hold fortunes for some, others may fall by the wayside. Being prepared for what the year has in store financially is as important a topic as any. In this article, we will look at financial planning advice for 2017.
Consider relocating your investments
Equity values have seen a surge in the recent months and as with anything that is overvalued, it will decline again. If you are investing on a site such as CMC Markets, you should consider relocating your investment portfolio. With the long-term in mind, it is an ideal time to move some of your equity investments into bond allocation.
Look toward long-term investments
It is important to aim for a long-term investment strategy because investing your money is a marathon, not a sprint. Your strategy should not be hindered by market instability. Diversified portfolios based on large capitalization stocks have managed to earn around 10% compound interest annually since 1926. In the same time, the average on government and corporate bonds has seen returns of 6% annually. To be successful in the stock market, it is all about sticking around long enough to see positive returns.
An important part of a financial plan is an estate plan, which includes emergency funds for dire times. Professional financial planners recommend that a person has at least six months’ worth of compensation in a liquid account. In the event of an unforeseen death, the individual’s family needs to be taken care of. This includes life insurance, personal savings and employee benefits.
Manage your debt
Debt has a way of building if there is no proper debt management plan in place. In these cases, debt tends to accrue making it increasingly difficult to escape from the debt prison that has been created. A debt management plan would prioritize the most expensive debts first such as your credit card, followed by personal loans and finally housing debt. An important part of debt management is avoiding future debt and cutting down on unnecessary expenses in order to prioritize the debt. Simple approaches such as packing a lunch instead of buying one every day can make a big difference over a period of time.
Be open about your money with a loved one
It is common to find that partners hide their financial situation from one another, inevitably having a negative impact on their relationship. Sit down and talk about your financial situation and goals for the year with your partner. Ultimately, your financial goal should be aligned for the coming year. Parents should also take the time to teach the importance of financial management to their children. They will learn about money either way so it is important to teach them the correct methods of managing their funds.
Look toward your children’s future
Small things that you do now for your kids can turn into something big 15 years down the line. A college fund that is started when your child is still very young is important as college fees can be difficult to manage when the time comes. A trust fund for when they leave college can also be a wise investment for your child’s future. Small investments today can be life changing in 15 years.
Review insurance plans
As time goes by, your needs change and so should your insurance coverage. It is a good habit to check your insurance coverage on a regular basis to ensure that it still matches your current needs. Life insurance, disability insurance, homeowner’s insurance, and health insurance should be reviewed. An umbrella policy can also become more relevant for your as time goes by and your needs change.
Look to maximize your flexible spending accounts
Many employers offer flexible spending accounts for expenses such as dependent care and medical costs. Take full advantage of these accounts. Furthermore, the tax savings that using these accounts can give is often substantial. Many of these accounts avoid tax altogether.