ANDERSON — A new year can be a time of resolutions for improvement, and local experts say making sure that personal finances are healthy should be at the top of the list.
So how healthy are your finances?
“I think it all boils down to having a plan,” said Cody Hooker, a financial advisor for Edward Jones, 1125 Broadway Street. “It’s important to sit down with a trusted investment adviser in order to get a plan set up.”
Establishing an emergency fund is one of the first things Hooker said people should do when improving the health of their finances. He said without such a fund people are at risk of getting off track with their finances.
“There is no ideal amount when it comes to having an emergency fund, but in general you should have six to nine months of expenses in savings,” Hooker said. “It is something you will want to work towards.”
Steve Warner, branch manager of Stifel, Nicolaus & Company, Inc., 33 W. 10th St., said investing in one’s retirement is more important today than ever.
“The days of working for the same company for 30 years and receiving a pension for you and your family are in many cases not available,” he said. “If you consider that Social Security was never designed to be your sole income in retirement, it is imperative that you start to accumulate funds in a retirement account.”
Warner said he encourages everyone to visit the Social Security Administration website at www.ssa.gov to get an estimate of what to expect for a monthly income from the agency.
“The one item that most often gets unaccounted for is the impact of inflation and how it will impact the value of today’s dollar,” he said. “The lifestyle you have envisioned might not be achieved or the age you planned to retire might need to be delayed.”
Hooker said it is never too late to start improving finances.
“Not doing anything is not a good strategy,” he said. “When you have the funds available, that is when you need to start.”
Hooker said Edward Jones has a five-step process in order to determine what people need to do to improve their finances.
He said the first step is to access a person’s current financial situation by looking at current savings, current investments and monthly expenses.
“The first step is to know where you are today,” Hooker said.
The second step is to explore where the person wants to be and what individual priorities a person has for their financial future. Hooker said each person will have different goals, whether for educational costs for children, savings for retirement or vacation homes.
Step three breaks down how goals or priorities can be achieved.
“We look at how much you are spending versus how much you are taking in and how can you get to where you want to be,” Hooker said.
The fourth step of the plan includes what options are available and what types of investments are needed to meet the goals a person has set.
“We want to make sure you have the appropriate mix of investments,” he said.
The final step is staying on track with annual evaluations with a financial adviser to make sure goals are being achieved. Hooker said birthdays are an ideal time for annual financial checkups because they are easy to remember, but he also bases those appointments on when a person first establishes their financial plans.
Hooker said not all debts are equal, which is why a financial planner can be very helpful.
“Higher interest and unsecured debt are the priorities,” he said. “Get those paid down as quickly as possible. Mortgages are normally the last to go, but everyone’s situation is different, which is why you want to consult with a professional.”
Most banking institutions and financial advisers offer free consultations to people interested in improving the health of their finances, but free resources are also available through the American Association of Retired People’s website at www.aarp.org.
Andrew Fox, banking center manager for Old National Bank, 2312 Charles Street, said his bank offers a free financial checkup.
“That entails a review of your debt, your type of debt and how to get out of debt,” Fox said. “With us being a community bank, we strive to help customers make smart decisions around their finances,” he said.
Fox stressed that not all debts are equal and understanding how those debts are used in credit scores can impact overall financial health. He said bringing in a recent credit report to the financial checkup can be helpful for those wanting to interpret their credit scores.
And the service is not limited to just their banking customers.
“This service is free of charge to anyone in the community,” he said.
Warner said he strongly advises people to avoid trying to find a “formula” to answer their retirement and financial health questions. He said a professional can provide personal guidance when it comes to important individual financial questions.
“As you can see, oftentimes the answer to many financial questions are answered with a question,” he said.
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Investing wisely According to FINRA, a regulatory authority for the financial industry, there are many titles associated with financial professionals which sound official, but which may not require any special training or certification. FINRA cautions people seeking financial advice to ask what, if any, formal licenses or credential a person has before sharing private information with the person. Source: www.finra.org