If you've gotten to the point where you've, paid off your pressing debts and met all your savings and investment goals, kudos to you. This is a great problem to have!
Well done on creating the financial habits that have gotten you to this point where you are now financially independent!
Your finances are smooth sailing, what comes after money?
Here are a few tips if you are at the point where things are great with your finances and you are trying to figure out your next steps.
1. Check-in with your investments regularly and rebalance your portfolio
First things first, you want to make sure that you are checking in and rebalancing your portfolio at least once a year. Some things to ask yourself during your financial plan check-in could include:
- Are your retirement plans still on track based on your current investments?
- Has your risk tolerance as an investor changed?
- What current risks are involved with your investment right now?
- How much of your portfolio is in cash in the event of an economic decline?
You may also want to schedule time with an investment advisor that has your best interests in mind i.e. a fiduciary, for a conversation on how your investments are doing overall.
Knowing how your portfolio is balanced, your investment allocations, fees etc are all very important when it comes to your peace of mind with your finances.
2. Diversify outside of traditional stock market investing
Investing in the stock market is the most common way people invest, however, if you already have a ton of money in stocks and funds, why not consider something else?
If you are comfortable and are willing to spend some time doing some research, you might want to consider investing some of your money in other avenues. For instance in real estate or in small business (as an owner or as an investor.
Again, the keyword here is research. Like with investing in the stock market, you should plan to invest for the long-term. 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 your investments, you are going to be liable for taxes. And so in your investment plans, you should also have a plan for any tax payments on your profitable investments based on what you expect your tax bracket to be at the time.
Tax planning is very important because your tax obligation can end up eating into a large chunk of your investment gains (aka capital gains). This, in turn, can impact the overall financial plans you may have made around your money. Be sure to understand what your capital gains tax rate is.
4. Think bigger than just you
Have you thought about your children's education? Caring 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.
If you are on the other side, of pursuing your financial goals, now is a great time to determine how you want to allocate funds to these different things.
5. Live a little, enjoy your life after reaching financial independence
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!