Save, Invest, Spend

These three words are very powerful when you right size them to fit your financial decisions today.  Saving to cash reserves for opportunities and planning margins.  Investing for future wealth.  Spending the rest with confidence.

In a declining market, this approach coupled with a financial plan allows investors to accomplish more.  Here’s how.

First, cash reserves should be established and monitored overtime as an investor.  It’s counter-intuitive to spend time thinking and strategizing about cash when you want to invest your dollars for long term growth.  Investing successfully over decades, not years, requires a safety blanket that may be comforting in times like these.  That blanket is cash.  Without accurately assessing your ongoing needs for cash, you may find yourself in a position where you must reactively sell your investments.  This is avoidable if you slow down and consider your near-term liquidity needs.

The levels of cash one may hold as an accumulator actively working in your 40s and 50s may be different then what you are holding as you repurpose your time in your 60s and 70s.  Each investor and their family will have a different definition of what “necessary cash” looks like.  Individual financial backgrounds influence this number as does prior experiences.  The key is having a conversation (ongoing) with your significant other to ensure you both are on the same page.  That may be difficult in stressful times, but one reason why we’re here to coach you so effective communication is possible.

How often should reserves be reassessed?  Current cash flow may provide answers to this question. Investors who embrace automation, so their cash holdings are refilled each pay cycle or on a systematic basis do best.  This allows them to turn their attention to the next step, investing.

Investing should have a purpose by giving each of your accounts a specific job description and timeline.  How?  Consider your goals and planning needs first, what do you want to accomplish?  Then work backwards to sort investment opportunities.  All investments carry a certain level of risk that needs to be acknowledged before proceeding.  Your timeline is an important variable as are the steps to liquidate for income needs.  Taxes are a consideration too.  Successful investors integrate these aspects into a financial plan guided by their priorities.

It’s common to own diverse investments, each account titled differently.  What financial planning addresses is integrating all these investments together to determine your planning possibilities.  What’s essential is having a repeatable process that allows investors to revisit their plan periodically regardless of economic conditions.  The process should be driven by goals and planning first, your portfolio second.

Continuing to purchase companies in your investment accounts now allow investors to take advantage of contracted pricing.  Again, automation is valuable in accumulating investments.  The investors who meet and exceed their goals continue acquiring, based on what their plan calls for.  They recognize prices will rebound at some point.  When is not as important as the belief that prices will increase in the long run.  This is where faith in the future is necessary.  Without it, it will be difficult for an investor to continue investing.

Those five years from retirement or currently distributing income in their 70s must have a strategy to stretch their resources through their 90s.  Distributing your wealth in the form of income requires a roadmap.  This is accomplished by selling investments strategically as income is called for while integrating with cash reserves.

A financial plan offers guidance on spending today so you may spend more tomorrow.  The rising cost of life will continue to and through retirement.  Spending is rarely static as it involves both fixed and discretionary expenses.  It may vary month to month and year by year, based on what’s important to you.  The save, invest, and spend cycle is supported by ongoing financial planning.  We’re here for you when you are ready to learn more.