Financial Advice and Wealth Management

Managing your finances now can set you up for a better future.

The 2010 findings from the Employee Benefit Research Institute's "Retirement Readiness Rating" showed that a large percentage of people, including high-earners, will likely to run out of money 10 to 20 years into retirement. While this may seem like bleak news, understanding how to manage your wealth and finances early can help set you up for a comfortable financial future.

Diversify Your Portfolio

If your portfolio is concentrated on one or two stocks, it can lose most of its value if those equities drop. Invest in more diversified holdings like mutual funds, which can help decrease your risk. Also be wary of equity portfolios that focus on a single industry. Re-balance your portfolio to appropriate asset class ratios. A financial adviser can help you determine where the best place to put your money based on the market. For example, according to Twin Cities Business, in 2008 a Merrill Lynch investor advised clients to increase bond and cash holdings because the company's analysts predicted better opportunities in bonds and the possibility of an equities market downturn.

Cut Expenses

Create a budget worksheet to track every expense you have for the next month. This gives you a "big picture" idea of where your money goes. Then, analyze each line item and ask yourself if there is a way to cut costs. For example, contact several other insurance providers for a quote to see if you can get a lower homeowner or auto insurance rate. Switch to a cable and Internet provider offering a lower rate on services. Look online for coupons to grocery stores and retailers. These types of things can add up and help you cut costs, which you can put into your investment portfolio instead.

Restructure Debt

Contact your mortgage company to see if you can refinance, which can result in a lower monthly payment and improved cash flow. Or, increase the amount of your monthly payment if you can afford it to pay down debt faster. Make it a priority to pay off high-interest credit debt as well. Transfer balances on your cards with high interest rates to lower promotional rate cards. Often you can get a zero interest card for the first year or so, which can save you money in interest payments.

Max Out Your Retirement Account

The earlier you start saving for retirement, the better. Compound interest accrues most in your later years, so build up your balance as soon as possible. If your employer offers a company match with a 401k, this is essentially "free money," so max out your 401k account or put in as much as you can afford. If you don't have a company-sponsored plan, invest at least 15 percent of each paycheck in an IRA account.

References

• Twin Cities Business: Wealth-Management Tips; Ingrid Case; June 2009
• Jewish Council for the Aging: Ten Estate Planning Guidelines to Consider; Ronald Fishbein; July 2007
• Women's Health: Recession-Proof Your Money: Stephanie Abramson
• Washington Post :The Scary State of Retirement Savings; Michelle Singletary; July 2010