Are you unsure if you’re progressing towards your retirement objectives? Without regular evaluations, you may believe your financial position is secure. However, securing your future requires more than your current savings. A sound financial foundation necessitates well-defined goals, emergency funds, and strategies to manage expenses and enhance your wealth. The first segment of this series tackled establishing goals, tracking your net worth, and readying yourself for unforeseen circumstances. Here are four additional questions to ponder as you strive to spend prudently, save effectively, and achieve your long-term retirement aspirations. Use these inquiries as a starting point for collaborating with a reliable financial advisor or conducting periodic financial check-ups in between consultations. While these questions may not cover every financial aspect, they can help you gain insight into your current situation, future trajectory, and optimal course of action. In this handbook: – Aligning your investment strategies with your financial objectives – Ensuring adequate insurance coverage to safeguard your assets – Estate planning – Evaluating your career path 1. How well do my investments align with my objectives? For many individuals, investing a portion of their savings is essential for meeting financial goals. Investing, although riskier than saving, offers better protection against inflation compared to leaving money idle in a bank account. Each individual’s investment approach is tailored to their objectives and risk tolerance. It is advisable to periodically review your investments to confirm they align with your retirement plans. One quick method to assess this is by calculating your net-assets-to-net-worth ratio. This ratio is derived by dividing the total value of your investments (excluding home equity) by your net worth. Generally, a ratio of at least 50% is recommended, particularly as you age. Young professionals at the outset of their careers need not be overly concerned if their ratio is lower, as they have sufficient time to contribute to retirement funds and develop a portfolio. A typical ratio for younger individuals may be around 20%. For example, if you possess $600,000 in stocks, an IRA, a 401(k), and an Alex Katz vintage print, and your net worth is $1 million, your net-assets-to-net-worth ratio would be 60%. ($600,000 ÷ $1,000,000 = 0.6) While this ratio offers insight into your investment status, it does not provide a comprehensive picture. If you wish to enhance your portfolio but lack the time for extensive research, consider engaging a professional such as a trustworthy financial advisor or fiduciary investment broker. Fiduciaries are obligated by law to act in your best interests and disclose any conflicts of interest. Navigating financial markets can be complex, and individuals without expertise may incur losses when attempting to manage investments independently. For more in-depth insights: “Set it and forget it: How to automate your investment strategies with a robo-advisor”. 2. Do I have adequate insurance coverage? An essential component of financial well
Protecting your family, possessions, and quality of life is crucial before an emergency strikes. Homeowners insurance is not only necessary if you have a mortgage but also highly recommended even if you own your home outright. It safeguards your most valuable asset and can prevent financial devastation in the event of damage or loss to your property. Home equity is a significant source of wealth for many Americans, and without insurance, it could take years to recover financially.
Homeowners insurance covers damages like vandalism, fire, smoke, water damage, and falling objects, as well as providing liability protection in case of injuries on your property. However, it may not cover natural disasters, so additional coverage may be necessary if you reside in a high-risk area. When shopping for home insurance, assess your needs, consider any add-ons for your situation, and compare quotes from at least three providers to find a policy that fits your budget.
Even if you are a renter, investing in renters insurance is a wise choice to protect your belongings, living expenses, and liability in case of damage, theft, or loss. Renters insurance is often affordable, with the average policy costing less than $25 per month. It can also offer coverage for lawsuits and temporary accommodations if needed.
Living in a flood zone necessitates flood insurance, as weather patterns have become more unpredictable, leading to costly damage. The National Flood Insurance Program (NFIP) provides flood insurance that can be purchased through an insurance agent, even if you do not live in a designated flood zone.
Car insurance is mandatory in most states and essential for protecting against the expenses associated with accidents, repairs, and medical costs. Life insurance is recommended if others rely on your financial support or if you wish to leave an inheritance. Consider the duration of coverage needed based on your circumstances, such as a 20-year policy for those with young children. Some employers offer life insurance as a benefit, but exploring external options may provide more comprehensive coverage.
Insurance, including disability insurance, can be a valuable investment if you have people who rely on your financial support or if your job involves physical labor. Disability insurance provides income protection in case you are unable to work due to injury or illness. Some states may offer this insurance through your employer, but it may not cover your full salary, so additional coverage is recommended for financial stability.
Pet insurance can help offset the high costs of veterinary care as your pet ages, ensuring that your furry friend receives the necessary treatment to live a longer life.
Estate planning is essential for ensuring that your assets are distributed according to your wishes after your passing. Creating a will with the help of an estate planning attorney allows you to designate beneficiaries, guardians for your children, and an executor to manage your estate.
Regularly evaluating your career is crucial for financial well-being. Assess your compensation and consider seeking a pay raise or exploring other job opportunities if you are being underpaid. Upgrading your skills or pursuing further education can open up new opportunities for career advancement.
Overall, staying informed and proactive in managing your insurance coverage, estate planning, and career development can contribute to your long-term financial health.
With roles evolving rapidly in today’s world, it may be time to consider additional training. Take, for instance, my husband who is a registered nurse. While he has ample room for growth in his current position, pursuing further training could be essential to advance his career. In the future, obtaining a nurse practitioner’s degree might be necessary for him to progress.
Delve deeper into: Best job options for seniors, retirees, and mature workers – explore second-act careers and side gigs that might suit you.
Improving your finances is always a smart move, even if your financial situation seems stable. Here are a few steps you can take to enhance your financial health:
1. Explore new income streams: For example, when my cousin faced job loss, she and her husband listed their home on Airbnb, providing them with extra income for family vacations.
2. Strategically pay off debt: Utilize methods like the snowball or avalanche technique to eliminate debt efficiently and boost your net worth.
3. Review your flexible expenses: Regularly scrutinize your bank and credit card statements to identify and cut down on unnecessary spending, such as unused subscriptions.
4. Seek professional guidance: Consider consulting a financial advisor, accountant, or attorney to gain expert advice on managing your finances effectively, especially if you and your partner have differing opinions on financial matters.
Dig deeper into: Creative techniques to save money – from maximizing earnings to reducing expenses and increasing your financial security.
FAQs: Strengthening your financial position for a brighter future
Find answers to common queries on retirement planning and more. Explore our comprehensive collection of personal finance resources designed to help you save, earn, and grow your wealth.
How much should I save for retirement?
The amount you need to save for retirement depends on your desired lifestyle. Use this guideline for a rough estimate based on your age:
– Age 30: 1x your salary
– Age 35: 2x your salary
– Age 40: 3x your salary
– Age 45: 4x your salary
– Age 50: 6x your salary
– Age 55: 7x your salary
– Age 60: 8x your salary
– Age 67: 10x your salary
What percentage of my income should I save?
A standard recommendation is to set aside at least 10% to 15% of your income for retirement or an emergency fund. However, you may need to save more based on your current financial situation, cost of living, and existing retirement savings.
How can I eliminate debt?
There are various strategies to tackle debt based on your financial standing:
– DIY methods like the snowball and avalanche approaches can help you pay off debts faster by targeting different accounts strategically.
– Debt consolidation involves obtaining a personal loan or a low-interest credit card to pay off debts at a reduced rate.
– Debt management entails working with a nonprofit credit counseling agency to renegotiate terms with creditors for
When managing debt, it’s important to find a payment plan that aligns with your budget. Debt management is often sought out when individuals are unable to utilize a do-it-yourself approach and do not meet the criteria for debt consolidation. Some opt for debt relief programs, such as debt settlement, where a company is hired to negotiate debts down to a reduced, one-time payment. However, the payment structure of these programs can be complex to decipher, leading to unforeseen costs for customers and potential dissatisfaction with the service rendered.
It is crucial to note that the information provided on this page is intended for educational purposes only and should not be considered as investment advice or a directive to purchase specific assets or adopt particular investment strategies. Before making any investment decisions, it is recommended to conduct independent research on products and strategies to ensure informed choices are made.
Sources:
Average Cost of Renters Insurance (2025), Nationwide. Accessed on February 5, 2025.
About the author:
Anna Serio-Ali is a reputable lending expert specializing in consumer and business financing. With a background as a certified commercial loan officer, Anna has authored and edited over a thousand articles aimed at enhancing financial literacy for Americans. Her insights and evaluations on personal, student, business, and auto loans have been featured in reputable publications such as Business Insider, CNBC, Nasdaq, and ValueWalk. In recognition of her expertise, she was awarded an Expert Contributor in Finance badge by the review site Best Company in 2020.
Article reviewed by Kelly Suzan Waggoner.
