Control Your Financial Future: A Step-by-Step Guide

stock women with tabletBy Mary Beth Suhr, Senior Vice President, Morgan Stanley Wealth Management

Money on your mind? You’re not alone. Americans think more about money on a daily basis than about anything else, including their health and fitness or their loved ones, according to GoBankingRates’ “2015 Life + Money Survey.” Never being able to retire was a common worry for more than one in seven survey respondents.

Financially preparing for retirement is what worries women specifically, found the Center for Talent Innovation. Though women are more financially independent than ever before and control $20 trillion in global wealth, four out of five say they lack confidence in their financial knowledge.

To feel more secure about your financial decisions and futures, having a plan for how to deal with your financial concerns is critical. With these five steps, you can gain a greater sense of control over your financial outcomes.

#1 Create a vision.

In my previous post, “What I learned from Evan Picone,” I suggested everyone create a vision for the life they want to have and set goals for themselves. If you are married or have a partner, involve them in the conversation and speak openly and honestly about your money, concerns, hopes and dreams. As the great Yogi Berra once said, “If you don’t know where you are going, you’ll probably end up somewhere else.”

#2 Understand your current financial condition.

This second step is about knowing your starting point. Gather your financial records including bank and investment account statements, records of other assets and debts, and tax returns. Prepare a statement of your net worth and annual income and expenses. What do you make and how much do you spend and save? Determine which expenses you can reduce or eliminate. Do you have a cash account for emergency reserves?  

#3 Design your plan.

Whether on your own or with the help of a trusted advisor, you are now in a position to design a plan that will help you reach your goals. In this step you will need to know how much money you will need to fulfill your objectives. Whatever your goals are you will need to determine which investments are right for you and which investment vehicles are best suited for your short- and longer-term goals. You will want to understand your willingness and ability to take risk.  Make sure your plan takes into consideration life’s unexpected detours such as death, divorce, disability or unique circumstances. Given the amount of information available today and access to online calculators, this part may seem overwhelming and could be an obstacle that prevents you from taking control. Don’t let this fear derail you. If needed, ask friends and family members for a recommendation for a financial professional who can help you.

#4 Maintain a written estate plan.

Thinking about your eventual death is not fun and is something that is easily put off. However, creating an up-to-date estate plan is a critically important step if not for you, then for those you love. Make sure you have an updated:

  • will
  • power of attorney for property
  • health care directive (who will make medical and life support decisions for you)
  • living (or revocable) trust that sets up provisions so your assets pass to your heir and beneficiaries outside of probate, which is a legal process that can be complicated, expensive and public (this applies to most people).

#5 Implement and monitor your plan.

Now that you have a vision for the life you want and a financial plan that serves as your roadmap to getting there, you need to make it happen. You can start by:

  • simplifying your financial matters by consolidating accounts and debts (saves time and money)
  • setting up automatic savings plans (are you maximizing retirement plan contributions?)
  • reviewing investment accounts quarterly or annually and rebalancing your asset allocation (at least annually)
  • monitoring the progress you are making towards achieving your goals and making necessary adjustments along the way.

There is no time like the present. I hope these tips help empower and motivate you to take control over your financial future, so you can spend less time worrying and more time enjoying the fruits of your efforts.

Sponsored by
Morgan Stanley

▶ Read more from the November 2015 newsletter.