How Financially Savvy are you?
April was National Financial Literacy Month, recognized in the United States as an effort to help Americans make sound financial decisions and to manage their money wisely.
What steps can you take to make sure your finances are on solid ground? The following is a simple checklist of things you should do.
Where Are You Now?
If you don’t know where you are, it’s hard to know where you are going. A basic personal financial statement listing your assets and liabilities in order to determine your net worth is a great starting place.
Whether you are still building wealth or focused on preserving and maintaining it in retirement, knowing your net worth and tracking it year over year is essential.
What are your Needs and Wants?
Needs are by definition things that you must have to live like food, shelter, transportation, healthcare and should also include savings for both short term emergencies as well as long term retirement. Wants
are things that you would like to have but are not necessary. For example you need a car but you don’t need a $100,000 Maserati. Spending on wants and neglecting your needs, especially saving for short and long term goals is often the biggest
financial mistake you can make.
Where is the Money Going?
Cash flow is a financial concept that measures how much money comes in and how much money goes out. The ratio between how much one of these numbers exceeds the other is the key to your positive (or negative) cash
flow and ultimately your net worth. Take your various account statements for the last few months and write down what comes in and what goes out. Do you have investments that could be better deployed or expenses that you could live without? A basic
budget forces you to think about what you are spending and can sometimes be a real eye opener.
What Do I Do Next?
You have figured out your net worth, assessed your needs and wants, and created a budget that produces a positive cash flow. Now what? After making sure you have sufficient funds saved for short term emergencies the traditional
wisdom is to pay down debt and save for the future. If the future is already here, the goal becomes spending your wealth wisely and making sure it will last. You also need to consider what type of legacy, if any, you want to leave for your family.
First Merchants Private Wealth Advisors can work with you to create investment strategies and financial plans that can provide comprehensive solutions in your pursuit of a secure financial future. We would be happy to help you assess your current
situation and assist you in creating a plan for the future. Please feel free to contact your Wealth Manager or one of our Wealth Advisors for a consultation.
David Forbes
First Merchants Private Wealth Advisors products are not FDIC insured, are not deposits of First Merchants Bank, are not guaranteed by any federal government agency, and may lose value. Investments are not guaranteed by First Merchants Bank and are not insured by any government agency. This material has been prepared solely for informational purposes. First Merchants shall not be liable for any errors or delays in the data or information, or for any actions taken in reliance thereon. Any views or opinions in this message are solely those of the author and do not necessarily represent those of the organization.
