8 Ways To Change Your Financial Life

These basic but powerful strategies can boost your net worth

most investors focus on first are likely to be the stock market’s historical averages, a company’s gains, a bond’s yield, or a mutual fund’s track record. Unfortunately, these mesmerizing numbers are just part of the picture. The fact remains that costs associated with buying stock or holding a mutual fund come out of your pocket and may serve to diminish the impressive gains that caught your eye in the first place.

Mutual funds, for instance, take a slice of your invested capital every year in the form of expenses and fees. Let’s take a look at a fund with a 2% expense ratio. If the holding provided an average 10% annual total return, after a decade, as a result of management fees, the stated return of $5,187 would shrink to $4,318. So, while it’s inevitable that you will pay to have a money manager guide your investing, the more you dole out, the longer it may take to attain your goals.

Thomason says taxes on such gains are worth your attention as well — especially if you hold stocks or bonds in an ordinary brokerage account that isn’t sheltered from annual capital gains taxes. He suggests investigating tax-free alternatives such as municipal bonds and municipal bond funds as a way to avoid sharing too much with Uncle Sam.

The longer the time horizon involved, the moreaggressive investors can afford to be. In that case, more money can be slotted into the stockmarket to help snare long-term gains.

7. PRIORITIZE YOUR GOALS
In the not-too-distant past, financial planning took a one-size-fits-all approach. Money set aside for retirement would be divided between a block of stocks or equity mutual funds and another block of bonds or bond funds. Money invested for college tuition would get the same treatment, as would cash earmarked for a new home.

The days of macro investing plans are gone, says Bolton. “What we do now is sit down with clients and ask them to list goals,” he explains. Next, Bolton directs his clients to order their goals by importance and then rank them by timetable. Each target gets its own portfolio mix according to its urgency. The sooner a goal must be met, s
ays Bolton, the more he is inclined to protect savings set aside for it. Under that scenario, he opts for bonds or, if time permits, stocks that offer high dividend yields. The longer the time horizon involved, the more aggressive Bolton says investors can afford to be. In that case, he might advise clients to slot more money into the stock market to help snare long-term gains.

For Joyce Hurley, 53, applying this strategy meant establishing financial priorities. A paralegal in Los Angeles, Hurley looks to have $130,000 set aside by the time her son, Jonathan, heads off to college in seven years. With her eye also on retirement, Hurley has developed a somewhat aggressive portfolio, with a sizeable weighting in stocks. “I sat down with my financial planner and set that as a goal with some urgency,” she explains.

8. TRUST

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