We believe managing money well is about more than knowing the technical stuff. It’s about feeling confident enough to act on what you know, to ask questions about what you don’t know (yet) and getting expert help if you need it.
Thinking about your goals will help you work out how much money you need to live comfortably, and how much you need to invest in order to achieve other goals?
Try asking yourself these questions:
- What do I want to achieve and by when? And how much will my money need to grow to do it?
- What do I already own (your assets, i.e. anything valuable) and owe (your liabilities)?
- How much readily available money do I need to put aside for everyday spending, unexpected events and emergencies?
- How much money do I have left to grow by investing? You can work this out by looking at your assets, then subtracting all your liabilities.
- In the future, how much might I be able to save and invest?
- How do I feel about the risk of investing (the chance I might lose money)? And how much risk am I prepared to take to grow my money?
Calculate your Net Worth with FinMarie monthly budgeting tool: https://finmarie.com/download-login/
Total Assets – Total Liabilities = Net Worth
Calculating your net worth annually is an important part of financial planning. It helps you assess your financial progress and how well you’re meeting your financial goals. It might also show you opportunities to make changes. For example, you might have more money in cash than you need for an emergency fund; you could invest that money for retirement or education savings.
It‘s all about the mix
Variety is the spice of life. The same is true when investing. It‘s called “diversification.” And it involves spreading your money across lots of different asset classes, rather than sticking with one. The great thing about diversification is that it can lower the risk in your investment portfolio – without reducing how much your money grows.
Choosing a mix of different kinds of investments and maintaining that mix are among the most important ingredients in your long-term investment success. This means creating an investment mix based on your goals, risk tolerance, financial situation, and timeline; and being diversified both among and within different types of stocks, bonds, and other investments. Check how we do it: https://finmarie.com/why-finmarie/how-do-we-invest/
Then give your portfolio a regular checkup. At the very least, you should check your asset allocation once a year or any time your financial circumstances change significantly—for instance, if you lose your job or get a big bonus. Your checkup is a good time to determine if you need to rebalance your asset mix or reconsider some of your specific investments.
Here’s a checklist of what you need to do.