BY BREANNA LUNDY
It’s almost the Fourth of July — time for
fireworks, picnics and a reflection on all the
liberties we possess in this country. But if
you’re going to enjoy the freedom to do the
things you want, especially during your retirement
years, you’ll want to take the steps
necessary to achieve your own “Financial
Independence Day.”
Here are a few suggestions for helping you
reach that goal:
• Liberate yourself from debt. For most of
us, a certain amount of debt is unavoidable.
But the greater control you can gain over your
debts, the better off you will be, because any
dollars not spent in paying debts can be used
to save and invest for your future. So look for
ways to cut down on your spending and think
about postponing some purchases until you
can pay for them in cash. It may not be easy,
but it’s possible. And by putting this “found
money” to work immediately in quality investments,
you may motivate yourself to keep a
lid on your debt level.
• Unlock the power of time. Albert Einstein
once said, “The most powerful force in the
universe is compound interest.” Einstein,
who knew a thing or two about the nature
of time, clearly recognized its importance in
investing. In fact, as an investor, time may be
your greatest ally.
The more years in which you invest, the
more dollars you’ll put in, and the longer
you’ll have for your investments to potentially
grow. Even if you’re just starting out in your
career and can only invest a small amount
each month, you’ll be starting to accumulate
the amount you’ll eventually need to enjoy the
retirement lifestyle you’ve envisioned.
• Release your investments’ growth potential.
To attain financial freedom during your
retirement years, you will need to invest for growth — it’s that simple. So include an appropriate
amount of growth-oriented vehicles
in your overall investment mix. Ultimately,
this mix should be based on your risk tolerance,
time horizon and specific long-term
goals.
• Free your investments from “clustering.”
In the investment world, as in many
other arenas of life, you can have “too much
of a good thing.” For example, if you own a
particular investment, such as a stock, that
has done well, you might think that it’s a
good idea to own more of the same type of
stock. But when investing, duplication can
be dangerous, because if a market downturn
affects one asset class particularly hard, and
much of your portfolio is tied up in that asset
class, you could take a big hit. Instead of
“clustering” your dollars around a single asset
or two, you could diversify your holdings by
owning a mix of stocks, bonds, government securities and other vehicles.
While diversification can potentially help
you reduce the impact of volatility on your
holdings, a diversified portfolio can’t guarantee
a profit or protect you from loss.
Achieving any type of freedom, in any kind
of endeavor, takes time and effort. That’s
certainly the case with financial freedom- you will need to consistently make the right
moves, over a period of many years, before you
can finally declare your fiscal independence.
But once you reach that point, you will likely
conclude that your diligence and dedication
were well worth it.
Lundy is a financial advisor with Edward
Jones Financial in Greenwich.
Photo Courtesy Edward Jones Financial