New Year's Resolutions for 2006

Brian Watson, CFP

Every January, people come up with new goals to help improve their life over the next year. Some people may want to eat healthier and exercise more, while others may want to read more books or travel to those often thought of vacation destinations. Your financial health should be a priority. An annual review with your financial advisor is no different than your annual check-up with a doctor. You need to assess any recent changes and adjust future behavior, if necessary. 

Some people set up strategies for their retirement and estate planning and assume everything can drift along on autopilot. Unfortunately, not reviewing your financial goals and strategies can be a failing game plan. As your resources and goals change, you must adjust your plans to accomplish your updated goals. 

A common annual review will consist of an agenda that covers all facets of your financial situation. Planning for the day when you must live off of your assets, reviewing and re-balancing your investment portfolio, and estate planning should be discussed.

An annual review serves to monitor and update your unique situation with your goals and objectives. Planning for retirement and your estate must be unique, as you and your family's financial situation is unique. If there is one area to commit more effort to this year, commit to improving and maintaining your financial health. 

Q&A

Explain in layman's terms what "Time Value of Money" is, and more importantly, what it means for my investing.

Time value of money is a concept that simply means the same amount of money is worth different amounts at different times. For example, if you had $100,000 today, it would be worth less than $100,000 in 1980, but more than $100,000 in 2030. Would $20 buy more or less gas today versus five years ago? Due to inflation, you would buy less gas today thus the $20 would be worth more five years ago than today.

From an investment standpoint, time value of money says you must earn interest or growth on your money over time. No one would get very excited if they could invest $10,000 today and in 20 years they would only get back $10,000. You would want some amount more than the original $10,000. Over time, the value of money changes.  

Prosperity Partners, Inc.
800-868-6230
JasonR@ppicash.com