Presented by: Hugh J. McGuire. President of McGuire Investment Group, a South Jersey Financial Advisor FirmAbraham Lincoln once said, “If I had six days to chop down a tree, I’d spend five of them sharpening my ax.” What Lincoln meant by that remark is that sometimes, planning for an event can take longer than the event itself. This is specially true when it comes to planning for a secure financial future. Many people put off financial planning, especially during uncertain economic times, because they either don’t know where to begin, or they don’t think they have enough funding to make it worthwhile. The truth is: there is never an ideal time or place to begin and there is no specific level of income or assets one needs to have to make planning for the future “worthwhile.” You can (and should) begin planning for the future regardless of which life stage you are in and regardless of how much money you have. To begin the planning process, you first need to identify your immediate and future financial goals. If you’re like most people, your goals will include protecting your family in the event you die prematurely or become disabled; managing your expenses while paying down debt; buying your first home or helping your children pay for college; saving for retirement; and distributing your assets to your heirs – privately, equitably, and tax-efficiently – proceding your death. Fortunately, there are measures you can take during each of your life stages that will help you build, and then maintain, your personal financial security. Let’s take a look at them:The Foundation Years: If you’re in your foundation years, you are perhaps facing the most difficult times you will ever have financially. You may be recently married or just out of school; you may be taking on debt in order to acquire – and maintain – your family’s lifestyle; and you are probably starting a new job or career. While you may be earning adequate money to live on, it could easily be taking all you have just to meet your monthly expenses (e.g. student loans, rent or mortgage payments, car loans, utilities and regular household costs). Steps you can begin taking now to plan for the future include managing your cash flow without going further into debt; establishing an emergency fund of 3 to six months income; and protecting your loved ones. To help achieve these goals, you should consider buying a combination of term and permanent life insurance. Term insurance is an inexpensive way to obtain the amount of protection your family needs, while permanent allows you to begin building cash values that accumulate income tax-deferred. If your finances permit, this is also a good time to invest in disability insurance, as you will be in a better position to lock in a lower rate based on your age and health. The Accumulation Years: Once you’ve covered the basics – protecting your family and income, establishing yourself in a job or career and perhaps buying your first home – it won’t be long before you’ll want to start setting aside a percentage of your income in tax favored accumulation vehicles such as IRAs and employer-sponsored 401(k) plans – especially if your company offers employer “match” dollars. Contributions to these plans can be made on a tax-deductible basis and plan assets grow income tax-deferred. During these years, money you were formerly contributing in rent may now be going towards your mortgage, the interest on which may be income tax-deductible to you. At the same time, you may also be building equity in your house. If you have children, you may want to think about setting money aside in a college savings program, and you may wish to begin expanding your investment horizon to include stocks, bonds, and mutual funds. While investments such as these carry a considerable volume of risk, they also come with the potential for better reward. Your accumulation years are also a good time to review your life insurance protection to ensure it is still sufficient to meet your family’s growing needs. You may also want to consider adding special riders, which might be available at extra cost, to your policy that extend protection to family members. The Preservation Years: Once you’ve reached the preservation years, you will probably have accomplished many of your early financial goals. What’s more, you may finally have the financial freedom to attain a few of the special things you may always have wanted to do such as purchase a vacation home, help your children or grandchildren get established financially, or perhaps even retire early. But your planning isn’t over yet. There are still steps you will want to take to help ensure that your future financial security won’t be compromised by a long-term illness or unnecessary taxes and penalties. Looking into your long term care and retirement distribution options, including how, when, and how much you should begin drawing from your savings, could save you a significant amount of money and make the difference between a comfortable or merely “safe” retirement. The Golden Years: When you do finally retire, you will enter what many people refer to as their “golden years”. During your golden years you can finally begin enjoying the fruits of all your hard work and planning. In this stage your debts are likely paid off; your finances are probably in order; and you likely have some discretionary funds that permit you to travel or enjoy a few favorite activities. If you’ve planned carefully, your golden years can be a time for doing what you want, when you want. During this stage, you may not only want to plan how you will pass your assets on to your heirs, but also how you might benefit a favorite charity. To achieve these goals, you will want to consult with a financial advisor about trusts, powers of attorney, and charitable giving strategies. If your income exceeds your expenses, you may also want to consider using distributions from your retirement plans to pay premiums on a life insurance policy. By doing so, you can amplify the value of what you leave to your heirs plus help make sure there are sufficient funds available to pay taxes, final expenses, and other estate settlement costs. Building personal financial security is not something you accomplish just once, nor is it something you begin once you’ve accumulated a specific amount of assets. It is something you start doing as soon as you can and keep doing throughout the various stages of your life. To that end, if you’re among the millions of working men and women who dream of one day being financially secure, I encourage you to take a few minutes – right now, right where you are – to consider your financial goals and the various life stages through which you’ll pass. Knowing which stage you are in- and the challenges and opportunities you will face during those stages – can help you make the right decisions.