Steps to a Secure Financial Future

A brochure offering simple, straightforward tips about developing a long-term personal financial plan, setting financial goals, saving seriously, paying for investment advice and keeping track of investment expenses.

Steps to a Secure Financial Future

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Table of Contents

Develop a Financial Plan

Do you want a secure financial future? The most crucial step you can take is to have a financial plan. People with a plan tend to save more money and take the time to make solid decisions about how to meet their goals.

Set Goals

By planning for things you want to accomplish in your future, you have a better chance of having enough money when the time comes. Long-term goals are things you want to accomplish in 5-10 years. For instance, long-term goals could be owning a home, starting a family and saving money for your children’s college and weddings. Short-term goals are for things you’d like to do today, next week or over the next couple of years. These might include changing jobs, getting married, buying a car or taking a vacation.

Start Saving Seriously

First, save enough to cover your emergency living expenses for several months. In a savings account, you have easy access to your money. Your account is insured against losses up to $100,000 by the Federal Deposit Insurance Corporation (FDIC).

Consider Investing

You can count on your savings account to deliver regular interest payments—but it won’t earn enough to keep up with inflation. Over long periods of time, investments in stocks and bonds have outpaced inflation, but savings accounts and CDs have not. Money tree image

Investments have the potential to earn greater profits than savings accounts do. They also have the potential to lose money—including some or all of your initial investment—or not gain as much return (profit) as you expected. This is called risk.

Investments are never insured—not by the government or anyone else. This means you will probably have no recourse if you lose money in an investment. That is the biggest difference between investments and insured bank accounts.

Get Advice

For some people, reading magazines and books about investing or doing research on the Internet is enough. Others need professional advice. A financial professional can help you choose investments and put your financial plan in action. Before choosing an investment advisor, interview several licensed professionals. This process will help educate you on the different types of services that are available to investors.

Keep Track of Expenses

Brokers and financial planners charge fees and/or commissions. You have a right to know how the broker or planner is being compensated. You may be asked to pay a flat fee or hourly fees. Some brokers and planners do not charge service fees, but, like many salespeople, earn commissions when they sell investments.

Before making any investment or opening an account with a brokerage, ask about the total costs, including sales charges and fees. These costs usually fall into two categories—up-front charges and ongoing expenses or management fees.

>Ask Questions

Before you make any investment, you have the right to ask for information about it. You have the right to investigate the background of investment firms and their salespeople. If they have been in trouble with the government, you have the right to know that.

Never allow yourself to be pressured into investing. Enter into an investment only because it makes sense to your financial situation and goals. Always keep a close eye on your account and never allow any transactions that you do not understand completely.

Use Tax-Deferred Investment Accounts

Individual Retirement Accounts (IRAs) or employer-sponsored retirement plans can help your retirement savings grow faster because no tax is paid on the earnings until you are allowed to withdraw it at age 59 1/2.

Invest for the Long Term

History has demonstrated that the market will fluctuate. One mistake that people make is trying to beat the market. Many advisors feel that stock market investments should be for the long term. By sticking with your investment for the long term, you may increase your chances of a solid return.

Published / Reviewed Date

Published: April 01, 2002

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Consumer Action’s Managing Money Project.

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Investing   ♦  


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