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9 Simple Steps to Meet Your Financial Goals

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By John Kageleiry

Wow, 2016 was quite a year. The stock market had its worst start in history, bond yields fell even further than just about anyone could have expected and we had a contentious and confusing presidential election. We also lost what seems like an inordinate number of celebrities and musicians too. Quite a year indeed.

So where did we end up? The stock market, as measured by the S&P was up over 12%, the yield of 10-year government bonds has almost doubled from its lows and we elected a long-shot outsider to be our next president, despite what almost every poll showed just days before the election. No matter what we think at any given time, the future will simply not look like we expect it to. It never has.

So how do we navigate the constantly shifting currents we face all the time? There are many responses to that question but mine would be this: Simplify. When it comes to how to save for and meet your financial goals a list of simple things you can do is an excellent crutch to lean on.

9 Simple Ways Meet Financial Goals

  1. Review your financial planning yearly or whenever there has been a material change to your personal situation. If you do not have a written, comprehensive plan to reach your goals, you really need to get one right away. A lack of planning can easily yield bad outcomes.
  2. Keep your investment approach as simple and uncluttered as you can. If you do not know what you own or why you own it then you are asking for problems. This will help you understand your own situation better and should assist you in sticking with your plan.
  3. And while we’re on the subject of knowing your situation, try to learn enough so that you could explain your investment plan to anyone in 20 seconds or less. You do not need to be an expert but you do need to grasp the basics of your own situation. You’ll feel better when you do.
  4. Keep your costs low. The trend to lower costs in mutual funds and ETFs is simply inexorable. That being said, far too many people never look at the cost of their investments. This means people are paying tens of billions in costs every year that should rightly be staying on their balance sheet. Lower costs equals more money for you, with no added risk. This is simplicity defined.
  5. When investing your savings, pay more attention to the risk you need to take to reach your goals versus the returns you hope to get. While returns come and go, risk is ever present, so it must be planned for and respected. As Warren Buffet has said, “Why would you risk what you need and already have for what you don’t need?” Take only the risk you need to, not what you believe you can tolerate.
  6. Make changes to your portfolio when you can and when it makes sense to do so. Don’t try to do this when the markets are flying and you feel like “hey, this is great” or when the markets are a mess and you are scared. I know it may be disappointing to sell some winners and buy some losers after a strong year of returns but that is really the only good time to do it. If you wait for things to change, the opportunity is usually lost. (For related reading, see: To Sell or Not to Sell.)
  7. Seriously consider the help of a financial advisor, one who is a fiduciary and serves your needs first. While you may feel that your age/profession/circle of friends/uncanny gut instincts (choose one or write in your own) will allow you to do as well as you can, this is just not likely. The average investor significantly under-performs not only in the markets but in the investment funds they have used. This is self-inflicted harm. It's because we are humans and we are riddled with flaws and biases that lead us to bad decisions when it comes to investing and managing our money. A good advisor will pay for themselves many times over by helping to manage our behaviors and decisions.
  8. Understand the difference between your long-term financial plan and the investments that serve it. The plan is your map to reaching your goals with the best odds available. It’s that thing that gets you to that big family picture in the future with smiles and grandkids.The investments are simply the tools to meet those goals and exist only to serve the plan. As Josh Brown of thereformedbroker.com puts it, "a portfolio isn't a plan."
  9. If you are planning with a spouse or significant other, make sure no one person has sole responsibility for the “investment stuff.” This can quickly turn into a nightmare.That person you trust and rely on could get hit by the proverbial bus tomorrow. Or they may not be as knowledgeable as you or they thought. The list goes on. Make sure you understand the basics of your own finances, how they work and where the money is. (For related reading, see: 6 Steps to Financial Success for Couples to Follow.)

I guess I could have made this list much longer if I wanted to. That would actually be easy. But simple is actually hard. That’s why most people get complexity when dealing with their financial needs. It’s seems impressive and it sells. Too bad it doesn’t work all that well. If the average person used this list to guide them in pursuit of their goals, they would have a real advantage over what most people do currently. While this list is by no means exhaustive, it doesn’t need to be. It just needs to be simple enough to be easily followed. And there is a great deal of value in that.

This article was originally published on Investopedia.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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