Starting the Assessment
When beginning financial planning, it’s helpful to make a list of everything you own. Include assets such as cars, stocks, bonds, mutual funds, cash, and bank accounts. Next, record everything you owe, such as student loans or credit card debt.
Funding Your 401(k) with Matching Contributions
Many companies match contributions made by their employees to their 401(k) accounts. The amounts of these matching contributions can vary significantly from one company to another.
Paying Off High-Interest Credit Card Debt
The next step in building your complete financial portfolio is to create a plan for paying off high-interest credit card debt. You can use the “debt snowball” method for this.
Fully Funding Your Roth IRA
A Roth IRA is one of the best retirement accounts available to investors in the United States. Most people can qualify – in 2021, if your annual income did not exceed $140,000 (if you are single) or $208,000 (if you are married and filing jointly), you can contribute to a Roth IRA. These limits increase to $144,000 and $214,000 for 2022.
Buying a Home
Saving for a down payment to buy a home is one of the best ways to work towards completing your financial portfolio. When you own a home, you’re turning what was an expense (rent) into equity that you can leverage for other loans.
Building Emergency Reserves
It is essential to create emergency cash reserves sufficient to cover basic living expenses for six months. Cash reserves help you pay for any unexpected costs such as home repairs, periods of unemployment, or healthcare bills.
Leveraging Other Investment Opportunities
An investment brokerage account allows you to invest in stocks, bonds, mutual funds, certificates of deposit, real estate investment trusts, government bonds, and other investments.
Investing in Yourself
If you are considering starting a business, enhancing your professional skills, or standing out to potential employers, consider investing in yourself by taking courses. These courses will help increase your earning potential, allowing you to expedite your financial plan.
Saving for Your Children’s Education
Here’s a secret: you have no obligation to finance your children’s education. Most parents want to provide the best life for their kids; however, you should consider that education may be more valuable to the recipient if they have a stake in it and are required to finance or contribute to their rising educational costs.
Staying on Track
Congratulations! The hard work is done – you’ve laid the foundation for a strong financial future. The key to success is making smart decisions and sticking to the fundamentals of building a complete financial portfolio.
Frequently Asked Questions
How much can I contribute to my 401(k)?
How much can I contribute to an IRA?
How much should I save for retirement?
Source: https://www.thebalancemoney.com/building-complete-financial-portfolio-357968
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