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Tips To Help You Find Balance Between Near-term Financial Demands And Longer-term Goals
Dealing with your own finances is a complicated, challenging task. You will wish to save for retirement; children, possibly marriage and may even need to help out aging parents. This can make it extremely difficult to choose and stick to a financial plan, especially if you are thinking of the future but dealing with the present. The following tips should help you keep your short and long term financial commitments and goals balanced:
Whenever you receive a little extra, whether a tax refund or a bonus; put it into your savings, ideally your retirement savings. You have not needed these funds up to this point so they can be safely tucked away.
There is financial help for college; there is not financial help for those who are retired. If you decide to use your savings to pay for child’s college then you may well become dependent on them in the future; not a scenario you will desire.
As your children grow and attempt to establish themselves it can be very tempting to lend or give them some funds to help get them started. However, there needs to be a balance between what you give to your children and how much you spend on your parents. You cannot afford to jeopardize your own retirement. Your children can start with the basics; you probably started the same way! You should also ensure your parents are claiming any benefits they are entitled to.
The ideal retirement portfolio should involve your funds being diversified across several risk areas. This is not the same as being held in several different funds. No matter how many funds your capital is tied up in they may all be using the same securities; this means your fund is no more diversified than if it were all in one place. Check your portfolio and ensure it is both diversified and in risk areas you are comfortable with.
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Define Your Goals
In order to manage your finances properly and establish the best savings plan for you it is essential to work out your short; medium and long term goals. Whatever you do, think about you and your family’s well-being. This means you are not advised to take risks that are unnecessary. Play it safe, save up and invest rationally.
- Short Term Goals are generally less than three years. This may be to secure the funds for a house deposit, a wedding or a new career. The best advice when saving short term is to stick to liquid funds which are relatively safe. These may not provide the returns of the higher risk investments but they will not incur the penalties that longer term investments will.
- Medium Term Goals are usually defined as anything between three and ten years. These can be the most difficult goals to save for. This is because you will need to find a balance between relative safe, liquid investments and higher risk investments which will usually tie your capital up. The idea approach is to balance your investments by having several of them across the range of risks. You should also establish acceptable movements in your investments and stick to these! This will limit your losses if your investment goes downhill and ensure you make adequate gains rather than being greedy if the investment goes upwards. Always keep a close eye on your investments.
- Long Term Goals are anything which is past ten years; the main goal in this category is your retirement. This should be a priority in terms of your financial planning and should involve contributing to a company pension scheme as early as possible. The earlier you start saving for retirement the more risks you will be able to take and the bigger your retirement fund will become. Diversification and close monitoring are essential to ensuring the success of your financial goals.
Balancing new-tem demand and long-term goals can be a real challenge. However it can be done as long as those goals are properly prioritized. Settle on what’s important to you right now, and then build a financial plan. Ask an advisor if you can’t find a solution!
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By William Taylor and Synaptic.co.uk!