Whether you’re just starting out or years into your financial plan, chances are you have more items on your “wish list” than budget available to pay for them. Even when you are constantly prioritizing, it’s important to strike the right financial balance between day-to-day needs and long-term goals. And it’s not just about asset allocation any more.
Asset allocation – the process of dividing an investment portfolio among various asset classes to improve its performance over time – helps you achieve financial balance in your investments. But there are many other aspects to consider as you navigate toward your long-term goals. The process of developing a comprehensive financial plan helps you stay aligned with your values and priorities and strike the right balance in areas that are important to you.
Northwestern Mutual’s financial planning process takes a comprehensive approach that analyzes your unique circumstances and goals. It integrates both insurance and investments in a customized action plan that you can follow to achieve a lifetime of financial security.
Every plan is different, but the comprehensive process includes the following key areas where striking a balance is beneficial:
- Risk and Reward
Managing risk is the foundation of Northwestern Mutual’s approach to financial planning, which places risk-based needs as the first priority. Once you are protected from the financial risks of death, disability or long-term care needs, other financial vehicles are incorporated into your plan to help you accumulate assets toward your future goals.
- Short-term and Long-term
Throughout life you need to balance immediate needs with long-term goals, and it’s not always easy to keep the end in mind. A 2011 Northwestern Mutual study found that 74 percent of Americans feel the pace of today’s society makes it harder for them to focus on achieving long-term goals. Your financial plan will help you establish consistent habits and set milestones to help you stay on track, and an annual review with a financial representative will ensure it accurately reflects your current priorities.
- Accumulation and Distribution
A comprehensive financial plan not only helps you accumulate assets during your income-producing years, but it also establishes a framework for distributing and preserving those assets during retirement. It includes strategies to manage how taxes and inflation affect your retirement assets, and incorporates different vehicles to minimize the impact, such as permanent life insurance and tax-deferred investments.
- Conservative and Aggressive
Your financial plan reflects your personal risk tolerance, time horizon and goals. It incorporates a balance of financial vehicles that fit your needs and can be adjusted over time as your situation changes. For example, someone in their 20s who is comfortable taking risks may choose a more aggressive investment portfolio at first, then modify it as priorities and circumstances change. Periodic rebalancing is recommended to keep your portfolio of assets consistent with your goals, needs and timeframe.
- Individual Needs and Family Goals
The planning process considers ways you can advance all of your long-term financial goals, including individual needs such as funding your retirement, and important family goals such as saving for a home or college, caring for dependents with special needs, providing for an elderly parent, or leaving a legacy through proper estate planning.
- Consistency and Spontaneity
Following a personal action plan designed for your specific needs and goals helps you to develop consistent, disciplined savings habits within time intervals that meet your needs. You can count on professional guidance from a financial representative, who understands your personal situation and will alert you to suitable opportunities when they arise. This partnership allows you to manage your finances without emotion and have confidence that your plan will deliver results.
- Insurance and Investments
Both insurance and investments are integral to your financial plan and fundamental to Northwestern Mutual’s investment philosophy. Achieving financial security means bringing to our clients a feeling of confidence that they will realize their financial goals through the actions they are taking today. Protecting against risk, with insurance, is the first step in any comprehensive plan.
The Northwestern Mutual planning process helps you develop a roadmap to your goals, and find the right balance for those critical aspects of your finances. Call a financial representative today to start the process or schedule a review of your current financial plan. Taking the time to plan today sets you on course to enjoy your best life tomorrow, and keeps you moving forward with confidence.