Several years ago I played golf with an attorney for a large bank.  As we walked along, we chatted about housing, as people in New York City are likely to do.  I had sold my apartment and was renting.  She was renting and wanted to buy an apartment in Manhattan within a year.

She mentioned that she had invested her money in high-tech mutual funds — waiting for these funds to appreciate before she sold them and used the proceeds to make a down payment on an apartment.

Aghast, I suggested that this was a risky strategy for someone who needed the money in such a short time. Also, I mentioned it was beginning to look as if high-tech had reached very high valuations for companies that had little or no profit.

Shortly afterward, the market for high-tech declined precipitously.

This anecdote underlines the fact that even highly successful people do not necessarily think strategically about money.

Determining carefully what you intend to do with your money and how to invest wisely, given your long- and short-term goals, is essential in maximizing your assets.

All investors need a financial plan to address their goals. Your plan should reflect your values, time frame, risk tolerance and a number of other factors.

Such plans are not carved in granite but must be reviewed and changed as your life changes.

Markets are constantly adjusting to economic, political, global and many other influences, and are affected by the emotional and psychological frame of mind of both individual and institutional investors. Your asset allocation for one period of time may not suit the climate of another or your changing life circumstances.  These factors have a very profound effect on financial plans.

Here is an outline of very basic considerations in financial planning.

Creating a sound financial plan – a life plan – should be based on the following factors and written to help to clearly define and execute your strategy:

  • Consider your values in creating the plan
  • Define your goals and concerns and where you would like to be in 5, 10, 20 years or more
  • Ask appropriate questions and know where to look for answers in building a plan
  • Set realistic expectations for return
  • Define key relationships with accountants, attorneys and a financial adviser
  • Establish appropriate benchmarks for evaluating success or failure

Take into account the factors listed above as you develop your financial plan, using the following steps as a general guide:

  • Analyze your net worth – List assets and liabilities.
  • Look at your asset allocation.
  • Review your risk protection and make adjustments.
  • Develop a plan for education of children and/or grandchildren, if relevant.
  • Review your retirement assets. If you’re approaching retirement or slowing down, adjust your portfolio, if necessary. Determine your cash-flow needs, analyzing your distribution options to make informed decisions.
  • Develop your estate plan carefully to help assure that your assets are distributed as you would like to family, friends, and charity. You might need to address other such issues as transferring a business, taking care of a person with special needs person, etc.
  • Review the plan at least twice each year and make adjustments based on your objectives and changing life circumstances.

In the coming months, I will address the following points:

–  It’s Never Too Late to Plan
–  The Art of Asset Allocation
–  Start with Yourself in Lifestyle Planning
–  Your Personal Balance Sheet
–  Frequently Asked Questions About Investing
–  Flexibility – Handling the Unexpected
–  Protecting Your Assets – Risk Management
–  Current Market Trends and You
–  The Unintended Consequences of Estate Planning
–  Making a Portfolio Retirement-Ready
–  Ten Retirement Pitfalls to Avoid
–  A Tax-Smart Plan for Withdrawals in Retirement
–  Tips for Charitable Giving.

As I continue to post on Women’s Voices for Change, please let know if these articles resonate with you.   We welcome your responses to the posts and would like to hear what other issues you would like me to cover.

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