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Money management requires plan


You wouldn’t start a long road trip without consulting a map, so the same should hold true as you develop a strategy for managing your investments.

Developing an investment strategy is a process — an organized, disciplined approach to making the right investment choices. It’s not an end in itself, but a means to make certain that you and your loved ones will be financially secure and that you will have the peace of mind of knowing that you have provided well for them.

You must first ask yourself “Do I need to develop a strategy?” The simple answer: “Yes.” Most excuses for not having developed an investment strategy really don’t hold up to the light of day. Do these sound familiar?

“I’m not old enough.” There is no magic age to begin developing a systematic approach to the management of your investments. But the sooner that you begin to set aside money to invest and determine how to invest it, the greater the opportunity you will have to grow a substantial asset base.

“I’m not wealthy enough.” The need for planning is not measured on a scale of wealth.

“I’m already comfortable with doing it as I go.” But wouldn’t you like to do all that you can to stay comfortable? If so, then a strategy is essential.

Create a broad outline for your strategy. An investment strategy that best suits your unique needs starts with a comprehensive evaluation of your current financial picture. Examine your investments, income tax considerations, cash needs, your time horizon and contingency planning.

Some trips lead to one destination. Others may include a series of stops along the way — each a destination of its own.

Paying for college and building a retirement reserve are two common destinations.

College. How much will you need to educate your children? With today’s astronomical tuition bills, borrowing may well be in the cards. But starting a regular program of investing — as early as possible — is an approach that can minimize the need to borrow.

Retirement. How much after-tax income will be needed annually during your leisure years? What will be the sources for that income? How much capital will be required to fund a secure retirement for you and your spouse? Determining the answers will help you settle on the retirement investment strategy that you will need.

Your investment strategy should be reviewed at various points through the years, especially when the following occur: children or grandchildren are born or adopted, family members pass on, marriage or divorce takes place, significant career or business changes occur, retirement approaches, a large sum is received or tax laws change.

No matter your destination, developing an investment strategy will help you travel down the road to long-term financial security.



Jeff Francis is senior vice president and senior investment officer for First Tennessee Brokerage. For more information about this or other personal finance issues, call 865-971-2321.

 

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