Introduction

There is no doubt that starting a family is one of the most radical changes that can happen in a lifetime. Children affect not only your social life, and the flow of your weekly schedule, but they also affect your finances. If you are expecting or desire children, read along to discover some key actions you can take to prepare for a bundle of joy.

Consider Insurance

This may be a good time to investigate purchasing insurance if you have not already. If you have insurance already, review your current plans to decide if you need to adjust for greater coverage. Life insurance is important for protecting your family’s financial situation if you were to pass. Health insurance is also important to consider, because children often have many doctors visits especially in their early years. Disability insurance is another measure of protection if you were to get sick or injured.

Create a Will

This is a good time to review your estate and ensure everything is set up correctly to transfer to your chosen people. This includes wills, potential trusts, powers of attorney for healthcare and property, and a living will. Having a will written is a measure of protection for your partner and children to receive your assets if you were to unexpectedly pass.

Start Saving

Saving and investing your money as early as possible will benefit you so much in the future when you want to pay for your child’s education or travel with your family. Compound interest is your greatest tool when saving for these future costs. Consider investing in a 529 Plan if you desire to fund your children’s education.

Save Your Out-of-Pocket Maximum

Having a baby is an expensive feat when considering medical costs. You should expect that you will hit your insurance deductible and reach your out-of-pocket maximum. To prepare for this, it is a good idea to know your maximum and save that amount. Make sure you know your maximum as listed on your health insurance plan, and research what expenses could come up in labor & delivery.

Research Your Maternity Leave

For my working parents, it is a good idea to research maternity/paternity leave and what that entails. Know how long it is, if you are paid or not, and any other details included by your employer. You and your spouse may need to consider adjusting how much you are spending and saving depending on your leave.

Talk To Your Partner

This is an important time to talk with your spouse about how your life is going to change.

Discuss:

• How will your financial situation change?
• Will either of your work situations change?
• Will one of you stay at home?
• How long will you be single or partial income?
• How will you make this work in your budget as a single or partial income family?
• What expectations do each of you have? Are you on the same page?

Think Simple

Regarding what you should purchase for your baby, there are many opinions. I believe simplifying and having a “less is more” mindset is less overwhelming for new parents. There are so many creative ways to affordably purchase what your baby needs as well as the special things you may want. Consider buying from secondhand stores, shopping sales, creating a registry that friends and family can purchase from, and making a list of just the basics. It is also important to remember that you can buy what you need as you go into the newborn stage.

Conclusion

There are so many factors to consider in preparing financially for a child. It is wise to consider how your life is going to change and taking the steps to financially prepare. I am no parent yet, but I’ve heard the love and joy is unexplainable. I hope that financially preparing can free up the mental load to allow those first moments with your new baby all the more memorable.

Matt’s Corner

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The post Financially Planning When You’re Expecting appeared first on New Century Investments.

If you are dreaming of buying your dream home, traveling the world, or funding your kids through their education, then how do you even begin to save for all these goals? How do you know what is enough to store away each month? This does require some planning and critical thinking but is worth the effort.

Prioritize

The first step is to write down a list of all the things you want to save for, and how much is needed for each one. It is recommended to keep the list as small as you can. Now, it is time to prioritize your list based on needs, wants, and wishes. There are essential things you should be saving for, including retirement and an emergency fund. Then, you can prioritize buying a home or planning to have a child.

Categorize

Next, sort your goals by the length of time it will take to save. The 1^st category is for your short-term savings goals that you want to achieve in the next 2 years. The 2^nd category is for savings goals that you want to achieve in the next 3 to 10 years. This could be for a down payment on a home or for your child’s wedding. The 3^rd category is for long-term savings goals that will not be touched sooner than 10 years from now. This could be for retirement or education. It is important to categorize this way because it will help you decide how to invest.

Invest

It is important to spend more time in the market than to try and time the market for great returns. For short-term goals it makes more sense to invest in less volatile investments, such as certificates of deposits, money market funds, or cash. This will keep your funds more stable to ensure you have the amount you need. If your goals are 3 to 10 years from now, you can strategize a moderate portfolio. More money can sit in stocks but have a good balance of safer investments to preserve capital. For long-term goals, you can have a riskier portfolio that is invested in aggressive stocks. It is still important to have some measure of safety and to not forget about diversifying. Focus on investing first for the goals that are at the top of your priority list.

Review

Taking quarterly, semi-annual, or annual meetings to re-assess your goals and your investment allocations are vital to keeping you on track. You may need to rebalance your portfolio, like selling some stocks and buying more bonds, if your stocks appreciate above your target allocation. The closer you get to your goals, the safer your portfolio should look. This also gives you the space to change your goals or adjust where needed as you realize you may need to save more for a specific goal. Have the long game in mind when planning your investment strategy to save for your goals. Stick to the plan and thank yourself later.

Matt’s Corner

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The post Saving For Multiple Goals appeared first on New Century Investments.

Setting financial goals is important, but it’s also essential to make sure they’re realistic. This means you can’t set up a goal that’s going to take years or decades to achieve and then become discouraged when it doesn’t happen right away. Instead of setting yourself up for failure—and potentially losing confidence in your ability to achieve your goals—try setting smaller milestones along the way. Not only will this make it easier for you to assess progress overall, but it’ll also ensure that failure isn’t an option!

Start with jotting down dreams and visions.

Think big. This should start off with an overall broad view. For example, do you want to start your own business? Do you want to save for your retirement? Have you considered how much you need to retire? What about college for kids? Any other goals like retiring in the Grand Cayman Islands? This is up to you to determine.

Think about your risk tolerance.

●     Risk tolerance is your willingness to take on risk in order to achieve a certain return.

●     If you are more risk tolerant, you can invest in higher growth assets such as stocks and real estate.

●     If you are less risk tolerant, you can invest in lower growth assets like bonds and cash investments.

Create a savings plan.

To make sure your finances are in good order, make a plan to save. You should first create a budget and determine how much money you can afford to save each month. Then divide the amount by 4-5 weeks, and write down how much needs to be saved on a weekly basis. The reason for this step is that it will help discipline the saver to determine how much they spend on a weekly basis, and any choices that might need to be made to achieve your financial goals.

The next step is deciding when and where you want to save. There are four main categories of savings: retirement, emergencies, savings and brokerages, and children’s education. The goal is that no matter what happens with our life circumstances, these goals will always be met without having to worry about making ends meet again as soon as possible because all income has been accounted for at every stage of life – even after retirement!

Create an emergency fund for yourself.

The first step to creating an emergency fund is understanding what it is and why you need one. An emergency fund is a savings account specifically set aside for unexpected expenses like medical bills, home repairs, and car repairs. Having this cash on hand will help you avoid having to take out a high-interest loan or use credit cards when unexpected expenses arise. The amount of money in your emergency fund should be enough to cover at least three months’ worth of expenses. For example, if your monthly rent is $1,200 and your monthly expenses total $2,000 per month (including food, transportation, and entertainment), you should have at least $6,000 – $10,000 saved up in an emergency fund before adding anything else to your financial plan. If you don’t already have an emergency fund started yet you will want one even if that would mean sacrificing nonessential purchases for a while until you save up the necessary amount—that’s okay!

Focus on paying off toxic debt.

Paying off debt is the fastest way to put your finances in order and save money. If you have several debts, one approach that typically motivates individuals is to pay off the smallest one first, then move on to the next largest. This will help you to build momentum and keep your motivation up! Another strategy is to pay off the highest interest-bearing debt. In fact, depending on your situation, you may mix-and-match strategies for paying off debt.

List your purchases.

One of the best ways to get a handle on your spending is to list all of your purchases. This can be done on an Excel spreadsheet, or by using an app like Mint or You Need a Budget (YNAB). Start with going through each category and listing all of your expenses. Once that’s done, prioritize them in order of importance—not cost. For example: if you have $200 budgeted for food but spend $300 on eating out at restaurants every month, maybe it’s time to rethink that quota! Make sure you’re prioritizing based on what matters most instead of just sticking with the same amount from month to month because it’s what people tell you is okay.

If this sounds like too much work for now, start small by creating a list of things that matter most but don’t have their own categories yet (e.g., groceries), then add those items into other categories as needed until everything is accounted for (e.g., alcohol).

Review life insurance coverage and estate documents.

Life insurance is a financial tool that can help protect your family in the event of your death.

Life insurance provides money to your surviving loved ones to help with funeral costs and other financial obligations. It can also be used as an estate planning tool to pay off debts, provide for children’s education and more.

When it comes to estate and asset protection, the idea is to start now. The alternative is waiting too long. Estate planning and necessary documents include Wills, Trusts, Gifts of property to others, Medical Power of Attorney & Healthcare Directives, Durable Power of Attorney, and more. They are all essential documents and should be considered in your overall financial plan. Just like estate planning and documents, the types of insurance that can be bought today vary. Insurance can include Auto Insurance, Homeowners Insurance, Life Insurance, Business & Personal Liability and Umbrella Policies.

Invest in retirement accounts like a 401(k) and a Roth IRA.

●     How much to save: You should be saving at least 10% of your income, but ideally more. If you’re not contributing enough, consider bumping up your contributions by 1-2% per year until you hit the sweet spot.

●     How often to invest: The best time for investing is every month on the same day. This will help keep you from forgetting and skipping months (which happens more often than you’d think), as well as avoiding any temptation to time the stock market. Discipline and consistency is key.

●     What to invest in: Stocks, bonds and mutual funds are all good options for retirement accounts like a 401(k) or Roth IRA because they have different risk levels that match up with your personal preferences and needs. For example, if one account is losing value because there’s too much risk involved then consider shifting some money over into another type of retirement account before things get worse!

Goals are meant to be achieved, so set goals that can be achieved.

As you set your financial goals, remember that it’s important to keep them realistic. This is especially true if you’re a beginner or haven’t set up any kind of savings plan in the past. When deciding on goals, ask yourself:

●     Are they specific? (i.e., “I want to save $2,000,000 by 67 so that I can retire and live my desired lifestyle” rather than “I want to save more money for retirement.”)

●     Are they measurable? (i.e., “I would like to save $10,000 annually for my daughter’s college in 10 years” instead of “I would like to save enough for my daughter’s college expenses.”)

●     Are they achievable in the time frame given? (i.e., “I’d like to buy my own house before I turn 30 years old.”)

Additionally, make sure your goals are time-bound so that you know exactly when you plan on achieving them and how much effort it will take until then!

Conclusion

Goals can be tough to achieve. It’s hard to know where to start, and it’s even harder when you don’t know what your end goal should be. That’s why planning is so important—it will help you figure out what steps you need to take toward achieving those goals by breaking things down into manageable pieces. So go ahead: Start setting some financial goals today!

Take the next step

Contact our firm if you have any questions! We help clients create and manage financial goals, as well as work even further beyond just finances with our clients. We can listen to you, and help you craft unique financial goals for your specific situation. Set up a call today!

Matt Ward, CFP^®

817-238-6300

Schedule Phone Call, Video Call, or In-Office Meeting

Matt.Ward@newcenturyinvestments.com

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A Guide to Setting Financial Goals and Assessing Risk Tolerance

One of the most common questions I get from clients is how to set financial goals. While there’s no formula or magic number that fits every financial situation, there is a process that can help you construct a plan based on your personal situation. It’s been studied and determined by psychologists that writing down goals increases your chance of success. Today’s post will cover the process I use with my clients in order to help them set financial goals and determine their risk tolerance.

Step 1: Determine Your Vision for the Future

The first step to defining your financial goals is to determine your financial vision: what do you want your life to look like financially?

You might already have a clear vision in your head, but if you’re struggling, it helps to do some introspection. What do you want your life to look like in the next five years? Do you want to own a home? Do you want to retire early? Do you want to send your children through college? Do you want to lower your taxes? Make sure to make these goals specific and measurable. This means defining your time horizon, as well as how much money you will need, for your goals. For example, if you want to save on taxes next year, this would result in a different solution than someone wanting to save for retirement in 10+ years.

Step 2: Define Your Time Horizon for Your Goals

When you set goals, it’s important to define your time horizon for the goals. The time horizon refers to the length of time you have in order to achieve your goals. How long are you going to give yourself to accomplish what you’re trying to get done? If you have a long time horizon, then you can take a longer, more methodical approach. If you have a short time horizon, then you may be forced to take a more drastic or immediate approach.

Step 3: Determine How Much Money You Need for Your Goals

When you’re considering risk tolerance and financial goals you need to figure out how much money you need in order to achieve them. If you’re saving for retirement, for example, you need to know how much money you’ll need to live comfortably in retirement. If a person wants to retire in five years and they want to retire with $1 million, after determining the factors below, they may find they need to save $20,000 per year and invest that money so that it grows over time.

Step 4: Assess Your Current Financial Net Worth

When reviewing your risk tolerance and financial goals, it’s important to assess your current financial net worth. This means that you’ll need to take an inventory of all of your financial accounts, including checking, savings, investments, credit cards, and any other loans and debts that you might have. If you’re not sure how to perform a basic assessment of your financial situation, you can use a tool like the NCI Planning tool, which we provide complementary to our clients, to help you assess your financial health. If you’re not in a place financially where you can actually invest in the stock market, then you may want to start with building an emergency fund or looking for ways to increase your income or reduce your debt.

Step 5: Assess Your Current Spending

When reviewing risk tolerance and financial goals it’s important to assess your cash flow. If you want to build your wealth you need to look at your current spending. A lot of people that I talk to admit they don’t know exactly how much and where their money is going. It’s important to track your spending in order to plan and save for your future goals. This is the only way you can accurately predict your future spending and adjust accordingly to meet your goals.

Step 6: Determine Your Risk Tolerance Level

The first step in determining your risk tolerance is to determine whether you’re an optimist or a pessimist. If you’re an optimist, then you believe that opportunities will present themselves and that the future will be better than the present. If that’s the case, you’re likely to be willing to take more risk. If you’re a pessimist, on the other hand, you believe that the future won’t be as good as the present and are likely to want to take less risk. The best way to determine your risk tolerance is to think about how you feel about money.

Your age is another factor likely to affect your risk tolerance. Younger investors are likely to have a higher risk tolerance than older, more stable investors. That’s because young investors have more time to recover from investment market corrections. This is the time to take big risks because you have plenty of time to recover, so there’s no rush.

Recap: The investment strategy you choose should be based on your financial goals, risk tolerance, and investment time horizon.

If you have any questions about determining financial goals or risk tolerance, please feel free to reach out to me at Matt.Ward@newcenturyinvestments.com.

Matt Ward, CFP^®

New Century Investments

Schedule Appointment

817-238-6300

Matt.Ward@newcenturyinvestments.com.

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