At Waller Financial, we are often asked by our clients and our partners, “What are you doing differently in response to the economic downturn?” From a planning standpoint the answer is simple: nothing. Our planning and investing process has been built through 37 years of experience in order to provide a steady, consistent approach through periods of market volatility.
However, the current economic climate has impacted personal finances in a real way. This new economy offers all of us the opportunity to make personal adjustments for added financial security. At Waller Financial, our planners monitor and adjust five personal financial levers to help achieve individual goals. If you are seeking to gain more control of your finances, consider making adjustments to the five levers below. Even small changes in these areas can make a big difference:
- Spending: The easiest area to make an immediate impact is by changing your spending habits. Your checking account statements provide insight into your normal spending patterns. Typically, the largest culprit of wasteful spending is on convenience items such as food and beverage. Minimizing these expenses will help mitigate uncontrollable expenses such as fuel and energy costs. Also, build a household budget and make sure that it is realistic. View budgeting as a tool to maintain the things in life you enjoy.
- Savings & Investment: By now you may be thinking, “Why contribute anything further to my 401(k) when all it does is keep losing money?” Building long-term wealth requires systematic, counter-emotional investment decisions. Investing should be boring and should not involve frequent trading. Stick to your savings and investment plan to ensure you reap the long-term gains from future market increases.
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Planning for Financial Events: Delaying major financial decisions such as purchasing a new car or starting retirement may be a real possibility today. However, certain events such as a child’s entry to college are fixed in time. Consider spacing flexible decisions to fit your finances while identifying alternative solutions for the inflexible ones. Working an additional two to three years can significantly increase the probability of a financially successful retirement. Additionally, your financial planner can help determine if changes are necessary to meet college tuition and other known expenses.
- Managing Risk: Risk tolerance typically increases with positive returns and decreases with negative experiences. Assess your ability, need and willingness to take risk as it relates to your long-term financial goals. Review your assumptions; rate of return, time horizon and future needs with your financial planner. You may find by either saving more while working, committing to spending less in retirement, or making changes to your asset allocation, you can still achieve your long-term plan.
- Size of Safety Net / Emergency Fund: Three to six months worth of living expenses should be set aside for unexpected events such as job loss. The size of your emergency fund will depend on such things as household income, minimum debt payments, potential unemployment benefits, and the elimination of work related expenses such as retirement contributions and childcare costs. Your financial advisor can make a recommendation on how large of an emergency fund you should maintain.
We all share in common goals such as retirement and providing better lives for our children. A structured, emotionless point of view to managing finances is often the best approach for long term success. For more information on how to take control of your personal finances in the new economy, please visit our website at www.waller.com or contact us at 614.457.7026.
Shawn Ballinger is a CERTIFIED FINANCIAL PLANNER™ practitioner and an Associate Planner at Waller Financial Planning Group. |
