Are You Active Or Passive With Your Financial Planning
When to Work for Your Money and When to Make It Work for You
When your boat capsizes miles from shore, actively trying to swim to land is not always the best option. Sometimes, treading water is a more effective way to use your energy.
Ducking under swells instead of swimming against them will conserve your strength even more.
With a dash of intellect and a generous dose of passivity, you will stay afloat until your rescuers arrive.
The same principle applies to your financial health—it is more important to make wise choices than to actively chase every penny.
If you are putting your money to work, you can conserve your time and energy for those aspects that require a more dynamic approach.
Financial Planning extends further than your investments; it includes the breadth of everything related to all your financially related decisions and actions.
To understand the holistic nature of financial planning, let's delve into the intricacies of financial planning that will empower you to make informed and strategic choices in managing your finances as well as serve as a guiding light on your journey toward achieving your financial aspirations.
Cash Flow
If your financial planning strategies were employees, cash flow management would be the lazy staff member who constantly needs supervision.
Unmonitored expenses constantly attempt to slip under your radar. Incoming account payments are always pushing for later deadlines.
Precarious seasons are always emerging.
If you do not monitor your targets every month, you will miss them; so your accounting should be monitored regularly and adjusted continuously.
Risk Management
Unlike cash flow, many people tend to be too lax about risk management.
Risk management demands attention because it plays a critical role in safeguarding your financial stability and ensuring that unexpected events or market fluctuations don't jeopardize your financial goals.
Without effective risk management, you may be exposed to potential financial pitfalls that could lead to significant losses or setbacks.
To effectively manage financial risk, consider the following steps:
Determine your risk tolerance level.
This involves understanding how much risk you can comfortably handle based on your financial goals, age, income, and personal circumstances.
Diversification is a key strategy to reduce risk.
Spread your investments across different asset classes like stocks, bonds, and real estate to minimize the impact of market volatility.
Investments
The prudent approach to your investment management demands more precision than most other aspects of your finances.
When it comes to monitoring your investment portfolios, regular and diligent oversight is crucial.
If it's well diversified, it should be left to evolve based on your strategy which should include your tolerance for risk and time horizon.
The same applies if you're young (in your 20's or 30's) and have your entire future ahead of you.
If you have a personal stock portfolio with diverse asset classes, more active management would be required. If you have mutual funds, they will need regular benchmark checks against similar asset classes.
At a minimum, all investors should conduct an annual portfolio review.
Use this time to evaluate your investment goals, risk tolerance, and overall financial situation.
Make adjustments to your portfolio as needed to ensure it remains aligned with your objectives.
In addition to regular reviews, monitor your portfolios whenever significant life events occur, such as marriage, the birth of a child, retirement, or a sudden change in financial circumstances.
These events may necessitate a more immediate reassessment of your investment strategy.
Emotional investors can overcome their fear by allocating the management of their portfolios to their trusted investment advisor.
Retirement
Women are unique in that we face special challenges due to career interruptions and earning less than men. Retirement planning should be a more active pursuit than most imagine.
Regularly reviewing your retirement plan is essential because financial markets, economic conditions, and personal circumstances can change over time.
By revisiting your retirement plan annually, you can adjust your savings and investment strategies to adapt to these fluctuations, ensuring you stay on track to meet your retirement goals.
Also, it's important to understand that retirement isn't just about reaching a certain age or financial milestone; it's an ongoing process that involves careful planning, saving, and decision-making throughout your life.
Each year's review allows you to make informed choices that align with your evolving vision of retirement, whether that involves adjusting your target retirement age, revising your income goals, or fine-tuning your investment portfolio.
In this way, you can navigate the dynamic nature of retirement planning and work towards a fulfilling and financially stable retirement journey.
It's important to understand that retirement is not just a destination; it's a lifelong journey that requires continuous assessment and adjustment.
Elder Care and Estate Planning
Your success should not end when you need elder care, so your financial plan should include your desires and requirements during the latter part of your life.
Estate planning requires relatively active management because laws and personal life circumstances may change frequently.
Each aspect of financial planning requires a level of involvement and action that is appropriate to your unique situation.
Every decision you make or decision you do not make has consequences.
Be timely, be intentional.
Each aspect of financial planning calls for a level of engagement tailored to your individual circumstances.
Every choice you make, or even choose not to make, carries its own set of outcomes.
Embrace timeliness and intentionality.
Remember, the more thorough your planning, the more you can enjoy a passive role in managing your finances.
Instead of being driven by fear and reactive decisions, partner with a financial professional to craft a comprehensive financial plan that offers you clear guidance.
With such a roadmap, you won't have to worry about navigating uncertain waters, as you'll have a sturdy vessel guiding you toward your financial goals with purpose, clarity, and confidence.
PARIS Financial Planning specializes in providing financial planning solutions for women.
Contact us for more information about our education, management, and wealth-building services.
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PARIS Financial Planning provides women with conservative strategies to grow their wealth during accumulation/savings years to protect their wealth during their retirement years and tax-advantaged strategies to distribute their wealth during their life and upon their death.
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