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Janice France-Pettit: Tips for long-term financial planning

Union Bank of California

Posted: June 26, 2010 4:55 a.m.
Updated: June 26, 2010 4:55 a.m.

The world moves fast for many investors, and numerous daily responsibilities can often cause some to lose sight of the financial big picture while focusing on the tasks at hand. Nevertheless, having an established and comprehensive long-term financial plan is very important.

"Preparing for the future is a huge component of smart investing," said John Loder, senior financial advisor of Union Banc Investment Services. "A detailed plan can be a vital step in positioning investors for long-term financial success."

Following are a few tips to consider as you gain a clearer perspective of what you can do to establish a thorough long-term financial plan.

Where's it going?
Building and maintaining an accurate and realistic budget, tailored to your lifestyle and financial situation, can be an effective tool to reach your goals. Take inventory, and track how much money you have to work with each month and where it is spent. Be sure to account for fixed spending, such as mortgage payments or insurance premiums, in addition to variable expenditures like quick trips to the grocery store or nights at the movies.

This will help you analyze your spending habits and adjust accordingly to reach your long-term savings goals.

Know your target
The amount that you save each year can have a significant impact on your financial future. It is generally recommended to work toward saving 10-15 percent of your annual income for retirement and increasing your contribution by about 1 percent each year if possible.

Using an online calculator or consulting with a financial advisor can help establish a savings target that tells you how much you will need in the future and how much you need to set aside to reach your goal.

Be realistic
When calculating your savings target for retirement, be sure to accurately account for the kinds of expenses you anticipate.

Major expenses like travel or a new house can heavily affect your savings target.

Take a close look at your current expenses and gauge how they will change in the years ahead.

Be proactive
You generally will want to start saving as early as possible, giving your money time to grow. The returns that your savings earn each year can generate additional gains in the years that follow. This is known as "compounding" and can be a powerful tool for building wealth.

Accounts such as individual retirement accounts (IRAs) and 401(k)s are two popular options that usually allow you to defer taxes on the money saved, and gains earned, within the account.

This means you can avoid income taxes on the amount you contribute (and until you start withdrawing the money), which may lead to increased savings. Furthermore, since many employers will match contributions to 401(k)s, you may benefit from contributing as much as possible.

Planning ahead is often the first step to accomplishing goals. Following these tips may help you reach your long-term financial target and get the most out of your money.

Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and not necessarily that of The Signal. The foregoing article is intended to provide general information about retirement planning for businesses and is not considered financial or tax advice from Union Bank. Please consult your financial or tax advisor.



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