Financial Planning: Younger Adults

Planning: The key to financial success

In life, we pass through several phases, each with different financial requirements. For example, the financial needs of a young married couple are not the same as those of a retired couple. That is why continuous, long-term planning is essential. Typically, there are three basic financial steps most people take in life. They include:

·         Wealth accumulation – the building of a solid, diversified financial foundation from which to expand over time. During this phase, allocation of money for a home, investments, life insurance and educational expenses is coordinated with tax planning strategies to ensure that current and future income is utilized effectively.

·         Wealth conservation – the inclusion of a variety of investment strategies and further diversification, designed to preserve and invest assets to help ensure adequate funds for current living expenses and future retirement needs.

·         Wealth distribution – the proper allocation of assets to heirs. Good estate planning should provide for the orderly transfer of assets while avoiding unnecessary tax burdens.

In addition to the complexities and changing priorities that occur over a lifetime, a financial plan also is affected by fluctuating economic conditions, taxes and inheritance laws. Our advisors have the expertise to thoughtfully design a plan with your circumstances in mind, helping you develop a long-term financial strategy for your individual needs.


The benefits of starting early

The main benefit of starting early is to take advantage of compounding interest. Compounding interest allows you to earn interest on both the principal you invest and the interest you earn – potentially enabling you to turn a small sum into a substantial one over time.

When saving for retirement, or another future goal, consider using dollar-cost averaging as a strategy – the process of making regular investments on an ongoing basis, regardless of price; for example, buy 100 shares of an investment each month, quarter or year. You are buying more shares of a security when its share price is low and fewer shares when its price is high.

Over time, it’s likely the average cost per share will be lower than the average market price. For many, this is the most realistic way to save toward retirement because these periodic investments come from a paycheck as opposed to having a lump-sum of money to invest all at once.

 

 

Dollar-cost averaging cannot guarantee a profit or protect against a loss, and you should consider
your financial ability to continue purchases through
periods of low price levels.