Financial Planning & Investing

Growing and preserving your wealth

Regardless of your stage in life, growing and preserving your wealth should be an ongoing priority. The following three steps will help your financial future.

Step 1: Assess your progress

As you start down the path to financial security, the very first step to take is making a proper assessment of your current progress. The beginning of a new year is the perfect time to focus on your family’s finances.

Calculating your net worth is the most accurate assessment of your overall financial picture. In the simplest terms, your net worth is the value of all your assets, less the total of all your liabilities. As you pay down debt and boost your savings, your net worth should rise.

It’s a good idea to revisit your balance sheet on an annual basis to see where you stand financially and help refine your goals for the coming year.

Step 2: Grow your assets

Usually, accumulating wealth happens over time, but there are important decisions you can make that will help you to grow your wealth at a faster pace — regardless of your age. First, make sure you regularly contribute to a retirement plan and take advantage of any company match available from your employer. While you have no control over the stock market or world events, you can control how much you save and how it’s invested.

Your asset allocation needs to reflect your time horizon until retirement and your tolerance for risk. Historically, stocks have out-performed both bonds and cash, but they’re also the most volatile. In general, your investments should become more conservative over time and should allow you to stay invested regardless of the market’s volatility.

Step 3: Protect your wealth

To protect your wealth, you need to manage day-to-day and long-term risk. To help manage short-term risk, build an emergency fund to cover three to six months of your family’s expenses in case you lose your job or are unable to work. Tapping your retirement dollars for emergencies can be extremely costly and could derail your future retirement.

Another risk to your wealth is investment risk. Investing too aggressively or failing to diversify can expose your portfolio to unnecessary volatility. In addition, moving all of your dollars at one time can be dangerous to your investment account. Making incremental changes over a longer period of time will help protect your portfolio from the large-scale risk of mistiming the move.

Finally, make sure you are adequately insured against risk. Protect your property through home, auto, and, if appropriate, an umbrella policy. Consider purchasing adequate life and disability insurance to protect your dependents from lost income. And don’t allow your health insurance needs to be put on the back burner, or your wealth could be devastated by a medical emergency. In addition, you may want to think about purchasing long-term care insurance to protect your estate against the ever-rising cost of home health care or an extended nursing home stay.

Following these three simple steps will not guarantee you’ll retire a millionaire, but they will definitely improve your odds. To secure your family’s financial future, assess your progress at least annually, put away as much as you can, and protect your assets by insuring against risk. That way, you can control the things you can and minimize the impact of the things you can't.

Learning Center articles, guides, blogs, podcasts, and videos are for informational purposes only and are not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.

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