The world of finance can be confusing to an “outsider,” especially when it comes to understanding the lingo. The technical jargon can be so overwhelming that it pushes people to give up trying to understand the basics, which can lead to procrastination and poor decision-making.
If you are feeling overwhelmed or confused by it all, here are 6 key aspects that can jumpstart your journey to financial literacy.
1. Basics of Financial Planning
Mastering financial, economic, and cash flow/debt management concepts is a great first step. Ask yourself: What do I own? How do I own it? What do I earn? What do I owe? By answering these simple questions, you are starting to build an understanding of your financial status.
2. Investment Planning
Investment planning is all about making your money work for you. Work with a trusted advisor who can help you build a diversified portfolio, manage your risks, and include a variety of investment vehicles.
3. Retirement Savings and Income Planning
Setting money aside today—delayed gratification—will allow you to have more choices in the future. A well-performing retirement fund needs consistent analysis, an evaluation of plans, and an understanding of Social Security, Medicare, and Medicaid.
4. Tax and Estate Planning
Understanding laws and management techniques related to taxes, property transfer, and estate planning can help you accomplish current and future financial goals.
5. Risk Management & Insurance Planning
Evaluating risk and assessing different types of insurance can help you protect your family, decreasing your anxiety about what may happen in the future.
6. Psychology of Financial Planning
When making financial decisions, never underestimate the power of fear and greed. Assess your feelings and behavior, then adjust accordingly.
Authored by Mark Van Drunen, CFP®, Regional President and Managing Director, MAI Capital Management | Information updated as of 03.28.2023.
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