Debt Fast Track

Rebuilding Financial Security: Focus on Critical Goals

Over the next few weeks, the focus of this blog will be to discuss strategies to assist families in re-establishing financial security – something that many have lost during this latest recession. 

Creating financial security has always required careful planning, review, measurment and adjustment.  In good economic times, it was easy to shrug off a misstep here and there.  Replacing lost money was easy, even for the novice.   The notion of building fortunes using other peoples money, or even our homes, became so popular that we allowed ourselves to completely disregard the inherent risks of investing.  In the mean time, the basic building blocks of financial security, such as paying off your mortgage, eliminating your debt, 6 months of emergency reserves, living within your means, etc. became the laughing stock of the financial industry.  No one is laughing any more.

While the basic building blocks of financial security remain constant though economic prosperity and d0wnturn alike, the details may look very different from one family to another.  For example, 6 months of emergency or food reserves looks very different depending on the size of your family, and, to a certain extent, your lifestyle.  Retirement savings is highly dependent on what you value in retirement.  Some want the ability to travel extensively during retirement, to visit children, etc.  Others simply want to be able to play golf.  Whatever the case, it is important to sit down with your partner and determine what you envision retirement to be like.

It is also wise to take into account common contingencies.  For example, 1 in every 15 Americans is either suffering from Alzheimers, or being an unpaid caregiver for someone with Alzheimers.  Of course, the increase of medical costs, combined with what is an almost certain decline in Medicare benefits to the elderly in coming years, indicates that the cost of living during the retirement years will likely be larger than most people account for.

I’m not bringing any of this up to discourage, simply to point out that there is no substitute for careful planning.  That planning may include a professional, but usually should just start with you and your spouse.  Identify key goals and objectives as well as philosophies when it comes to children, education, weddings, housing,  retirement, etc.  Once you have created a comfortable framework with your spouse, it is time to start matching goals with reality.  Most realistic goals are achievable, but may require sacrifice and professional advise.  For example, most people could save money each month, but it may require a shift in lifestyle to do so.  This is where it is often helpful to sit down with a professional that is practiced at helping outline how to reach true financial security.

So, take out pen and paper, schedule some kid-free time with your spouse, and start by discussing the following questions:

1)  Retirement:  When do we want to retire?  Where do we anticipate living during retirement?  What activities do we want to afford during retirement?  Are there medical issues during retirement that we already have some forewarning of?  How much do we want to set aside to help our adult children financially?

2) Children:  What is our philosophy when it comes to funding clothing, sports, special educational needs, extracurricular activies, etc?  How do we want to assist our children with higher education goals?  How do we want to assist our children with weddings?  How do we assist our children with unexpected needs after they move out of the home (job loss, divorce, etc?)

3) What constitues 6 months of emergency savings for us for: 1) money, 2) food, 3) shelter, 4) clothing, 5) medical?

4)  How much insurance do we need to maintain our lifestyle in the case of death or dissability?  How will our children be cared for in the case both of us die or are disabled?

5)  When do we want to own our home free and clear?

This is a good starting point, and if you get this done, you are already ahead of most of your neighbors.  Once these questions are answered, it is a matter of tactical planning and mathematics to determine how to achieve the financial security.  Using the right professional to help in the planning process can save money and agravation over the long run.  Here you are not looking for an investment advisor, but someone who is trained in the details of debt elimination, budgeting, savings and other critical security aspects of finance.

 The tast may seem daunting, but the results are worth it.  Just imagine for a couple of minutes what it would be like to have all of the above items addressed?  You would feel free and relieved of the stress that most Americans face each day financially.  Whether you are a young couple just getting started, or facing retirement in 5 years, there is no better time than now to start planning.