Identify Your Family's Financial Priorities
Jan 15, 2016
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Families and Finances
A recent study conducted by Forbes Consulting Group in 2013 titled, State of the American Family: Families, Financial Attitudes & Planning, found that families1 financial priorities are focused around 4 specific areas: Income, Savings, and Retirement.
The challenge for many of us is determining which of the four areas should be our primary focus. Ultimately, only you can decide where to put the majority of your financial efforts. Factors such as age, marital status, number of dependents and short- and long-term goals all will play a part in your decision making. Thats the easy part. The hard part is trying to balance all four at the same time which you will have to do - along with the rest of your day-to-day life.
Income
Your income(s) is the source of funding for most everything you enjoy in life. In fact, when viewed over the span of your entire working life, your income may be your most valuable asset. For those whose priority is to use their income to build and accumulate assets for the future, your first step should be to protect your income (inquire with your employer regarding your Group Long Term Disability options), and, once secure, look for ways to increase or supplement it. What side hustle could you do in your free time to generate additional income?
Savings
If savings is your top priority (for the purchase of a home, a childs education, or other reason), view the sacrifices you make now as the foundation of building and accumulating wealth. First, create a budget that will identify how much, and for how long, you will need to save to reach your goal. Start your savings plan by creating an emergency fund (equal to six months of income), then investigate various savings vehicles available. Consider making arrangements to automatically withdraw money from your paycheck or checking account. Set it and forget it is an ideal way to save.
Retirement
Regardless of your age or situation, retirement planning should be a priority for everyone. Once you have an idea about how much income youll need in retirement (70% of current income is a good rule of thumb), the simplest way to save for retirementis through your employers 401(k) or similar plan. If your employer does not offer a qualified retirement plan (or you are self-employed), create your own by using an IRA (traditional or Roth) or Self Employed Pension plan. Also consider whole life insurance. While primarily purchased for its death benefit, the build-up of the cash value in a whole life insurance policy is guaranteed, and can help give you a reliable source of supplemental retirement income.
Editors Note: This article was provided by Bradley Waller, a financial representative with MassMutual Financial Group; courtesy of Massachusetts Mutual Life Insurance Company (MassMutual). Local sales agencies are not subsidiaries of MassMutual or its affiliated companies.
1. Access to cash values through borrowing or partial surrenders will reduce the policys cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
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