Author’s note: I developed the following bulleted guide as a presentation for my 401(k) plan clients. The complete version, inclusive of graphics, can be found at the Addison Advisors web site. The helpful tools I suggest below are provided without any form of third party compensation and are intended only to provide the reader with free, practical ways to implement the 10 steps to financial wellness.
Step 5 – Buy the Right Insurance
a. Insurance you probably need
- Home
- Auto
- Health
- Term Life
- Long-term Disability
b. Insurance you may want
- Long-term Care
- Umbrella Liability
c. Insurance you probably don’t need
- Whole Life
- Variable Annuities
- Extended product warranties
d. Best Practices
- Choose the highest deductible you can afford, especially on home insurance
- Self-insure when possible – remember your emergency cash reserve
- Empty nest retirees usually don’t need life insurance – one of many reasons to prefer term over whole life
Helpful tools: SmartMoney Life Insurance Needs Calculator
Step 6 – Maintain Excellent Credit
a. Key Benefits
- Qualify for more loans
- Secure the lowest interest rates available
- Improve your job prospects
b. Essentials
- Pay your bills on time
- Keep a few credit cards with high available balances
- Use your cards but pay them off every month
- Check your credit reports annually – for free (see below)
- Aggressively correct any errors in your reports
Helpful tools: AnnualCreditReport.com, CreditKarma.com
Step 7 – Manage Your Emotions
a. Avoid making financial decisions based on
b. Know your risk tolerance and invest accordingly (see tool below).
c. Get on the same page as your spouse / partner.
d. Consider hiring a professional advisor
Helpful tools: Rutgers University Risk Tolerance Quiz
Step 8 – Invest in You
a. Importance
- What you earn is as important as what you spend and save
- Today’s workers are competing in a global marketplace
- Job security is a relic of the past
- Pensions, social security and other government assistance provide less security than ever
- Individuals with skills in demand will always find work
b. Essentials
- Keep your skills current by volunteering for new or “stretch” assignments at work and seeking relevant training if you sense your skills becoming outdated.
- Seek feedback from your employer – your performance level should never be a surprise.
- Be intellectually curious – learning is a lifelong process.
Step 9 – Measure Progress
- Making progress towards a goal provides satisfaction similar to that you would get from what you are giving up
- “You get what you measure”
- Measure progress in a way that’s sustainable rather than precise
Helpful tools: Mint.com
Step 10 – Adapt to Change
a. Expect the Unexpected
- Following the previous 9 steps will position you to weather adversity
- Altering your plan to changing conditions is called adaptation, not failure
b. Remain Positive
- Economies and financial markets are inherently cyclical
- When times are unusually bad, they always get better
- When times are unusually good, make preparations for the downturn
c. Ask for Help
- Resources are available to help with all aspects of your financial well-being, from your company’s HR department or retirement plan providers to fee-only financial planners and investment advisors
- Don’t hesitate to learn about and take advantage of these resources
