It’s important to recognize the value that careful planning today can make in helping ensure your wealth continues to support your family during and beyond your lifetime.

Rather than try to impart everything there is to know about money management in this short blog, here are 10 quick tips for making meaningful financial decisions.  (Please keep in mind that it is always best to speak with a professional advisor about your personal financial management plan.)

  1. Make sure your will, living trusts, powers of attorney and healthcare directives are in place and reviewed on a regular basis. If you’re like most people, you probably aren’t thinking about what would happen if you became unable to direct your own medical care because of illness, accident, or advanced age.  Unfortunately, if you don’t prepare these documents now, rather than later, these important matters could wind up in the hands of people who may know very little about you and your preferences.
  2. Develop a written master plan for your business and personal wealth that maximizes value during your lifetime and minimizes income and estate taxes. One of the most common mistakes people make when managing their finances is to make spending and investment decisions apart from a personalized financial plan. It’s best to have a written master plan. No matter how good your investing choices are, if they’re made outside the framework of a larger plan, you’re inviting trouble.
  3. An Investment Policy Statement (IPS) should be your guiding document. An IPS helps you focus on what you can control, such as how you plan to stay on course with your personalized financial plan and how you are going to minimize fees and taxes. Whether you’re working with a financial advisor or not, a strong IPS can be an invaluable tool for helping you achieve your financial objectives — even when unpredictable events happen.
  4. Don’t try to beat the market or to play the market. Instead, use the science of evidence-based investing to participate in the market. In trying to beat the market, investors usually underperform not just the market, but even the investments they choose, because they buy and sell at less than optimal times.
  5. Review all your insurance policies to make sure they are providing the appropriate benefits and protection. You should review all your insurance policies regularly, ideally on an annual basis, but at least every few years. Review the policies, talk to your agent, ask questions. As your life moves on, you may find new and different needs for your various policies.
  6. Talk to your family about your wealth. A crucial component for the success of these family discussions is honesty.  In the long run, honesty will build and develop the trust and understanding necessary for a successful and smooth transition of wealth.
  7. Your retirement planning should go hand-in-hand with your investment planning. Know how your savings or pension plan is invested. Learn about your plan’s investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return.
  8. Do not buy annuities unless they fit into what you are trying to accomplish and there is no other choice. There are many reasons why some people shouldn’t buy an annuity.  Typically, you only want to consider an annuity after you’ve maxed out other tax-advantaged retirement accounts, such as 401(k) plans and IRAs.
  9. Never surrender or lapse a life insurance policy if you are over 65 without first checking the secondary life settlement market to see if the policy could be sold for greater value. The definition of a secondary life settlement is simply the sale of a life insurance policy from the original policy owner to a third-party investor. The selling policy owner receives an upfront cash payment in exchange for transferring ownership of the life insurance policy. When the insured passes away, the investor collects the policy’s death benefit.
  10. If you are a business owner offering a retirement plan, consider delegating your investment selection liability to a professional advisor (get it in writing). If you own a business and are paying someone to manage your company’s retirement plan for you, it is certainly reasonable to ensure that the firm with whom you are working is also taking on the liability obligation.

While these 10 tips are meant to point you in the right direction, it is important to speak with a professional advisor who understands wealth planning.  If you are interested in discussing any of the topics referenced in this blog post, please contact Fahmy & Associates today at 703-760-4630.

— Ken Fahmy