College tuition, retirement saving and more—your financial goals can sometimes seem overwhelming. This five-step process from Merrill can help you pursue them all.
Even in your peak earning years, it may not seem like there is enough money coming in to cover your current expenses and save for future needs.
How do you juggle all of these competing claims for your financial attention? “It is essential to take a step back and consider all of your goals and values,” says Valerie Galinskaya, managing director and head of the Merrill Center for Family Wealth. She suggests the following five-step process.
Put Your Values and Goals Down on Paper
Sit down with your family and make a list of what is most important to you. “Your advisor can then help you craft a few short value statements that you can use to guide your family’s financial decisions,” says Galinskaya.
Next, make a list of your goals. Galinskaya recalls one couple who identified raising their children to be independent and resourceful as a core value. Concerned that their children would not be motivated to work hard if they had everything handed to them, they sat down with their children and talked about how much they would be expected to contribute to their college tuition every year.
Sort Your List
Prioritize your goals into essential, important and aspirational buckets. Essential goals absolutely cannot be put off, such as saving for retirement. Important goals are less critical but represent core values such as education or leaving a legacy. Anything that is merely nice to have is aspirational and should be lowest among your priorities.
Get Family Members on the Same Page
Even couples and families with similar goals can differ when it comes to priorities, notes Matthew Wesley, also a managing director at the Merrill Center for Family Wealth. To narrow down your list, Wesley suggests a technique he calls “The Fist of Five.” A goal is proposed and discussed and then each family member votes by raising zero to five fingers, representing their level of support. “The process continues until every goal on the list gets at least three fingers from each person,” says Wesley. “That way, you are not just getting compromise; you are also building consensus.”
Build Your Investments Around Your Priorities
Work with your advisor to put investment strategies in place to help you pursue your goals. Start with the essential goals, says Galinskaya. Once you have a solid strategy for funding those, you can create strategies for your important goals and plan for your aspirational goals.
For a goal requiring near-term funding, you will want to keep the money in a safe, liquid account such as a CD or money market account, says Galinskaya. For goals more than five years away, you may consider adding higher risk/higher reward assets to your portfolio, or opening an education savings account. For goals 10 years out or longer, you may be able to afford to invest more aggressively because your investments could have time to rebound from any market dips.
Reconsider Your Plan Periodically
Life changes or unforeseen economic events may necessitate adding or subtracting goals or changing their timelines, says Galinskaya. Your advisor can help you understand the potential impact of significant decisions across all of your goals.
“Along the way, you may likely have to make tradeoffs,” says Galinskaya. “But by using this five-step process, you will be armed with the knowledge you need to help you prioritize your goals and align your assets toward pursuing them.”
For more information, contact Merrill Lynch Financial Advisor Jeffery D. Price of Price & Associates office at [email protected]or (817)-410-4940.