Five easy steps to improve your financial health


National Financial Literacy Month isn’t over quite yet so there’s still time to get your personal finances in better shape before the end of April.

Last time around, we focused on some basics when it comes to retirement saving plans.

In this post, I’d like to cover some personal investing precepts designed to accumulate and protect your wealth.

Retirement experts generally recommend workers to save 12% to 15% of their income. There’s nothing to esoteric about that. The trick is developing strategies and habits that make this annual savings goal achievable. Here are five things you can do right away to work toward a more secure financial future:

1. Examine your fixed costs. There is a lot of focus on trying to cut the discretionary spending, stuff like the the getaway weekends, dining out and so on. But what about fixed costs? The big ones of course are rent or mortgage payments, and taxes. Those are tough to adjust. Yet don’t forget about car payments, utilities, phone bills, insurance premiums, and broadband and cable. If you can reduce or eliminate those expenses, you will be surprised by how much money you unlock for savings. Getting there requires some effort, but it’s doable without dramatically altering your lifestyle.

2. Automate your savings. This should be a no-brainer. Arrange to have a portion of your paycheck or checking accounting diverted into a savings account or an employee 401(k) plan. However, judging from how low many average retirement account balances are for various age groups, this advice doesn’t seem to have taken hold.

3. Sock away windfalls. If you are lucky enough to inherit some wealth, get an unexpectedly big tax refund or strike it rich at work with a big bonus or stock options, resist the urge to head to Rio. Pour most or all of it into your savings and get ahead of the game.

4. Six-month emergency savings. If you get a raise or a second job materializes, make sure you use that extra cash to set up an emergency fund, in the event you lose your job or face some other type of financial setback. The experts suggest aiming for six months’ worth of expenses in savings. One more thing: When you do have to take money from this fund, it’s important to immediately start rebuilding it again.

5. Consider getting help. It doesn’t make much sense to lose a chunk of your hard-won savings to taxes. But if you are careless about financial planning, you will do just that. Considering hiring a financial professional, and make a will regardless of your age or how much wealth you have. Without a will, the state law decides.

Also be careful about proceeds from life insurance, which can create unexpected estate tax exposures. Consider setting up an irrevocable life insurance trust to keep your estate below tax thresholds.  Right now, your taxable estate must exceed $5.34 million for you to be exposed to the federal estate tax. But 19 states impose their own death taxes, and some kick in at much lower wealth levels.

Do you need help with retirement investing? Check out our free investment guide.

DISCLAIMER: The information in this material is not intended to be personalized financial advice and should not be solely relied on for making financial decisions. Neither Covestor Limited nor its representatives are engaged in rendering tax, accounting or legal advice. A qualified professional should be consulted regarding the effect of such considerations on the matters covered in this article. Past performance is no guarantee of future results.