What investments to consider for financial planning?
Financial planning gives you a step up in your desire for financial stability. If you have a financial plan, you will be more likely to achieve security for your future. Yet, Schwab’s 2021 Modern Wealth Survey shows that 33% of Americans have a written financial plan in writing. Most people (42%) say they don’t have enough money to bother putting a plan in writing, 22% admit financial planning is too complicated, and another 19% say they are too busy.
But deliberate financial planning makes a significant difference to your financial situation now and in the future. So, what investments should you consider in your financial planning?
· Emergency funds
First, consider how you will invest your emergency funds. These funds make it possible to stay out of debt when you get an unexpected bill. An easy to access account with at least 3 months’ income makes for a good emergency fund. Don’t worry about investing these funds at high rates of return. Just keep them somewhere, so you don’t need to use credit if you have to pay a bigger than expected medical, car repair or household bill.
· Insurance
Consider insurance as your way of having an emergency fund beyond that 3 month’s income. A variety of types of insurance coverage will help you build a financial foundation for your investments.
· Health insurance
Accidents and injuries happen. Consider your health insurance an investment in your health and your financial stability. Without it, everything else you have worked for could be undermined with a bill hospital or treatment bill. Plus, consider long-term care insurance.
· Disability insurance
Disability insurance is an investment that takes care of your family if you can’t work. Check with your employer to see what coverage you have and top it up as necessary.
· Life insurance
Term life insurance could provide for your dependents and pay off debts if the worst were to happen. This ongoing investment doesn’t provide value while you are alive, aside from peace of mind. Still, it is a solid investment for your survivors.
Permanent life insurance will give you a cash value component you can use as an asset while you are alive. You can borrow against it or withdraw cash. Plus, your survivors will benefit.
· Stocks and Bonds
Stocks are a way companies raise money by selling you a share in the company’s assets and earnings. They tend to be risky because you could lose your principal. Bonds are a way you lend money to the government, a company, or your bank. A bond may have a guaranteed return rate, and your principal is safe, but your return would be lower than a stock that does well – and better than one that does poorly!
· Mutual Funds
Mutual funds pool your money with others, so you don’t buy stocks, bonds or other assets alone. The fund manager does the investing. You have to pay that manager, and often an annual fee, even if the mutual fund does not perform well.
There are other options for investments to diversify your portfolio when you are financial planning. Consider investing in property, Money Market Funds, and Registered Retirement Plans.
Reach out, and we’ll discuss your investment options as part of your financial planning process. Call today.
