Have you had your annual financial check-up?

If financial freedom is a life goal for you, a financial plan is critical. A comprehensive financial plan should be reassessed periodically to incorporate life changes. You can begin at any stage in life with just a few small goals and build from there. Then, review and adjust your financial plan each year to optimize your performance.

Whether you are just getting started or want to make sure you are maximizing your savings, consulting a knowledgeable advisor can save you time and help you set achievable goals. This overview can help you determine what financial stage you are in and provide key tips to start building a solid foundation for your financial future.

Stage 1: Early Career

As you begin your career, you may have already taken on student loan debt. A financial advisor can help you strategize ways to minimize that debt and make smart investments. It’s important during these years to establish good credit to be able to take advantage of better loan rates and increase your purchasing power down the road.

While it can be hard to take any money out of those early paychecks, establishing a 401K earlier in your career can pay off when you retire.

“With your first job, it’s important to set up a Roth IRA or 401K retirement plan,” explained Earl Johnson, an investment sales manager at First Federal Investment Services. “Even $20 a paycheck can make a difference when you let decades of interest compound. And with a Roth IRA when you take out that income after the age of 59 and a half, and have had the account open at least five years, it’s tax free.”

Also, if you work for a company with a 401K matching program, find out the maximum amount your company will match and set that as a minimum goal for your contributions to maximize your 401K contributions.

Key Takeaways:

  • Build and monitor your credit score
  • Take advantage of 401ks and company matching opportunities as early as possible
  • Organize your money with multiple bank accounts
  • Budget and track your finances with tools like Money Management

Earl Johnson, Investment Sales Manager at First Federal Investment Services

Earl Johnson, Investment Sales Manager at First Federal Investment Services

Stage 2: Growing Wealth

In this stage, you may have had several different jobs, started a family, or bought your first home. Any of these life decisions will have a major impact on your financial landscape. Regular checkups with an advisor can help you adapt your financial goals to complement your life goals. They can also help you understand how to assess and optimize your current portfolio of assets.

“When you change jobs more frequently it’s especially beneficial to have a long-term relationship with a financial advisor to help adapt your plan as you experience life changes,” noted Johnson. “That stability can make life transitions easier and give you an advocate in times of financial upheaval.”

As soon as you have children, preliminary estate planning becomes an essential part of a dynamic financial plan. An advisor can help you look ahead to create new financial goals for both you and your children, as well as weigh life insurance and inheritance plans. It is also a good time to start an emergency, or “rainy-day” fund for any unexpected expenses. During this stage of major life changes it’s essential to perform annual check-ups to keep your financial plan optimized.

Key Takeaways:

  • Diversify your portfolio of assets
  • Start a rainy-day fund
  • Review and adapt your financial plan after any major life changes
  • Evaluate life insurance options
  • Start an estate plan

Stage 3: Managing and Preserving Wealth

In this stage you want to protect the wealth you have accumulated, while continuing to optimize growth and manage expenses. You could also be facing a new round of college tuition expenses for your children, or mortgage payments on a new home or investment property.

Understanding your net worth, or assets vs liabilities, is key to making informed planning decisions. This stage is a crucial time to evaluate how close you are to the amount you need to retire and optimize your investments to help pursue that goal.

Many people who have changed jobs multiple times in their careers risk losing track of past 401K savings if they haven’t contacted their previous employers to roll them over to their current plan or a retirement account. A financial planner can help with that process to make sure you don’t lose out on those investments.

Key Takeaways:

  • Understand your net worth
  • Convert 401ks from previous jobs
  • Perform financial check-ups to optimize investments
  • Calculate how close you are to your target amount for retirement

Stage 4: Distribution of Wealth

In this stage it’s important to make sure you have adequately budgeted out your retirement years and have a plan to address any lingering debt or expenses. If investment returns are a large part of your retirement income, you should evaluate your risk tolerance vs your investment goals. The tax rate on those returns is another important calculation in correctly budgeting investment income.

This stage is also the time to fine tune your estate plan to make sure your wealth will be distributed in the manner of your choosing.

“A detailed estate plan can save your family stress and uncertainty down the road,” Johnson added. “It’s also important different types of wealth distribution, such as gifting money to your heirs each year rather than one lump sum down the road. A tax professional can help you determine a sound gifting strategy.”

Key Takeaways:

  • Budget out your retirement years
  • Fine tune your estate plan
  • Consider tax implications on investment returns and estate distribution

Michael Ivers, Financial Advisor with First Federal Investment Services (right)

Michael Ivers, Financial Advisor with First Federal Investment Services (right)

Your Future Starts Now

Retirement age can sneak up quickly, so it’s important to plan ahead. A sound financial foundation will help you retire when you want and have the resources to enjoy that new life stage. Building an ongoing relationship with an experienced advisor can alleviate stress during financial transitions and save time when adjusting your investments to life changes. However you decide to develop your financial plan, the time to get started is now!

To connect with a financial advisor at First Federal Investment Services visit www.ourfirstfed.com/investment-services

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