Building Your Financial House from the Foundation Up

Building Your Financial House from the Foundation Up

Building Your Financial House: A Blueprint for Success

Home Improvement

If you’re a fan of home improvement shows, you know that a beautiful house is more than just aesthetics. The same concept applies to building your financial house. Just like a sturdy foundation, sturdy walls, and a dependable roof are crucial for a home’s longevity, your financial portfolio requires careful planning and allocation to weather economic downturns, market volatility, and other challenges that life may throw at you.

Creating a blueprint for your financial house involves developing a detailed plan that encompasses all aspects of your financial future and the methods and materials required to achieve your objectives. Similar to a well-built home, your financial blueprint should consist of:

A Strong Foundation

In building your fiscal house, you need a solid foundation. These are typically stable assets that provide a reliable income and withstand market fluctuations. Examples include savings accounts, certificates of deposit (CDs), government bonds, and fixed or fixed index annuities. These assets offer protection and can help you navigate turbulent economic times.

Sturdy Walls

The walls of your fiscal house, although not as invulnerable as the foundation, should still be resilient. Investments at this level can add value to your portfolio and offer potential for growth. Examples include corporate and municipal bonds, conservative dividend investments, and private real estate investment trusts (REITs).

A Dependable Roof

Your financial house’s roof represents investments that carry higher risk but offer the potential for significant growth. These include stocks, mutual funds, exchange-traded funds (ETFs), and variable annuities. While these assets come with more risk, they can help you maximize your wealth over the long term.

Where to Start

Determining how to allocate your assets can be challenging, but the “Rule of 100” is a good starting point. Subtract your age from 100 to determine the percentage of your portfolio that should be allocated to riskier assets. For example, if you’re 45 years old and have a long-term investment horizon, you might feel comfortable investing 55% of your portfolio in stocks or ETFs.

As you approach retirement age, it’s advisable to reduce your risk exposure. For instance, if you’re 65, you may choose to limit the risk in your portfolio to 35% or less. Remember, everyone’s financial plan will differ based on individual needs and goals.

Don’t Forget Ongoing Maintenance

Just like a house requires regular maintenance, your financial portfolio needs periodic evaluation and adjustments. Reevaluate your investments and strategies annually to ensure they align with your goals. Asset allocations may need to be rebalanced based on market performance, and your risk tolerance may change over time. Seek professional advice if you need to remodel your financial plan to better suit your evolving needs.

Lessons from Recent Times

The COVID-19 crisis served as a stark reminder of the importance of building a fiscal house that can weather unexpected storms. In just a few short months, financial markets experienced significant volatility, leaving many unprepared. A carefully planned and maintained financial portfolio can help mitigate risks and provide stability in times of uncertainty.

Seeking Professional Guidance

While DIY projects can be fun, it’s wise to seek professional assistance when building your financial blueprint. Working with a financial advisor can help you avoid costly mistakes and oversights, particularly as you approach retirement. They can help you design a portfolio that aligns with your goals while keeping you secure for the long haul.

Remember, building your financial house is an ongoing process. Regular evaluations and adjustments are essential to ensure your portfolio remains aligned with your objectives. With a well-designed and well-maintained fiscal house, you can confidently navigate the ups and downs that life may bring.

Kim Franke-Folstad contributed to this article.

The appearances in ANBLE were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to ANBLE.com. ANBLE was not compensated in any way.

Kurt Supe, John Culpepper, and Brian Quick offer securities through cfd Investments, Inc., Registered Broker/Dealer, Member FINRA & SIPC, 2704 South Goyer Road, Kokomo, IN 46902, 765-453-9600. Kurt Supe, Andrew Drufke, and Brian Quick offer advisory services through Creative Financial Designs, Inc., Registered Investment Adviser. Creative Financial Group is a separate and unaffiliated company. The CFD Companies do not provide legal or tax advice.