First of all, let me say this is a great problem to have and if this is your main money problem, kudos to you for creating the financial habits that have gotten you to this point! So, you've fully funded your emergency fund and you've built up a solid retirement nest egg or your retirement nest is well on it's way, what next?
What do you do when you finally get to the point where your finances are smooth sailing?
I'm going to share a few tips of things to keep in mind/think about, if you are at the point where things are smooth sailing with your finances.
1. Check in with your investments regularly, rebalance your portfolio
You want to make sure that you check-in and rebalance your portfolio at least once a year. Things to consider during your check-in are things like -
- Are you still on track for your retirement timeline in terms of how you are invested?
- Are you currently an aggressive, semi-aggressive, semi-conservative or full conservative investor?
- Does that need to change?
- What are the risks involved with your investing style? What are the average rates of return?
- How much of your portfolio is in cash?
"It's very important that you understand how your investments are allocated."
It's also worth scheduling some time with an investment advisor or your brokerage firm just to talk through how your investments are currently balanced. It's also very important that you understand how your investments are allocated. Spend some time learning about the funds your retirement money is distributed across and their associated fees, who manages the fund, their reputation etc.
2. Diversify outside of traditional stock market investing
Investing in the stock market is not the only way to invest your money, and if you are comfortable and are willing to spend your time doing some research, you might want to consider investing some of your money in other avenues such as real estate or in business (as an owner or as an investor).
"The keyword here is research."
Again, the keyword here is research. Like with investing in the stock market, you should plan to invest for the long-term and the research you do will help you determine how viable an investment is and if it makes sense for your overall long-term financial plan.
3. Have a plan for taxes
The one thing a lot of people tend to forget is that when you earn money from investments, you are going to be liable for taxes and so in every investment plan, you should also build in a plan to pay taxes on your profitable investments based on what you expect your tax bracket to be at the time.
Tax planning is very important because taxes can be a large chunk of investment gains and can impact overall financial plans you may have made around your money.
4. Think bigger than just you
Have you thought about your children's education? What about care for aging parents? What about giving back to the community and helping others? These are all things that if you plan to do, will need to be built into your long-term financial plan as well.
5. Live a little
Life is short and is not all about money. Now that things are running smoothly with your finances, do some fun stuff. Take those trips you've always wanted to. Spend time with family and friends. Enjoy the life that you've been working so hard to create - you deserve it!