For most of us, as some point in our lives, we start thinking about the future or a legacy. We start imagining what retirement could be like, what a life of true financial stability would mean. In parallel, we consider our current financial position and whether it will take us where we want to be.
Perhaps you’ve got some investment ideas. One of the most essential aspects of investment and financial control is crafting a complete financial portfolio. This may be a term that you’ve heard floating around, but in essence, it’s a collection of investments held by one particular person. In a professional sense, it can be a collection of investments held by a company or a hedge fund. But for those looking to be savvy with their money, a financial portfolio can be the backbone of those seeking financial freedom. How do we begin?
The Building Blocks
Before you begin your financial portfolio, you need to determine where you are right now in a financial sense. You cannot think about investments unless you are currently stable. Robbing Peter to pay Paul is not recommended. In fact, investing while you have obligations now could get you in present trouble. Have you ever heard of a balance sheet? For companies, it is a financial statement that reports an enterprise’s assets and liabilities – and shareholders’ equity – at a point in time. Creating a balance sheet listing your assets and their values and your debt would give you a sense of where you are right now. It’s important to get an idea of your net worth so you can start to make the necessary changes in your life if need be.
Paying Off Debt
Debt is always that cloud hanging over your head, and if you want to build a sustainable portfolio, you must craft a plan to pay off all your debt. But specifically, the debt that has the highest interest. On your balance sheet, look at all the debts and rank them by interest rate. One way to tackle that cloud is to start to pay off the highest debt interest rate and work your way through them all. While there are lots of other debt reduction methods, like the debt snowball method, that are very popular, achieving a complete robust financial portfolio means you’ve got to get rid of the biggest debt amount.
Paying off debt may also mean for you reaching out to your bank or banker for some guidance. With technology today, we rarely deal with bankers but their assistance and advice in reducing debt may be very helpful. Make a trip to your local bank and simply ask.
Focus on The Best Financial Accounts
This is a two-pronged attack. Firstly, you’ve got to focus on your 401k. By contributing to this with your Employee Matching Funds, you will be able to build this up a lot quicker. As employers match dollar for dollar up to the first 3, 4 or 5% in some cases (sometimes more), this means you’re doubling on your investment. Remember, these funds will be tax-deferred, so even if you have a lot of debt, your 401k is important. In a previous article, I mentioned Tony Robbins’ book. I highly recommend that you pick a copy immediately. This is going to save you in so many ways in 20, 30, 50 years’ time! Another additional option is to consider a Roth IRA. You can look on RothIRA.com to get a detailed guide on Roth IRAs and you can reap so many benefits by having one. The great thing about this type of account is that the withdrawals are tax-free. And if you ever have any issues, either due to unemployment, or unforeseen costs, you can use your Roth IRA to fund it.
Seeking Out Investment Opportunities
Once you got all these in place, it’s time to start looking for investment opportunities.
Let’s talk about real estate first. You may have thought of it. Personally, I believe it should not be your first shot because to truly benefit from it, you have to invest at a very high level, meaning multiple properties with a lot of cash. Some people consider buying a house an investment but it’s not, unless it’s paid off. Yes, you get more perks when owning your own home, the interest on your mortgage is tax deductible and as a home usually appreciates in value over time, it could draw you some profit later in life but don’t bank on it today.
Next, diversifying. You can open a brokerage account, and this gives you access to stocks, mutual funds, bonds, real estate investment trusts – and cryptocurrency. Investments are one of those lifelong practices that can have numerous ups and downs. Because you’ve now gone through paying off debt, you’re now in a position where you can focus on developing your investment portfolio by putting money into specific stocks and shares.
It can be a big leap to go from nothing to investing in lots of stocks and shares but this is where you need to find the right broker. But there’s no harm in you following your gut from time to time.
How about Bitcoin? I’m sure you’re asking. This type of currency became popular in the past few years. Personally, I am still not familiar with them. Like other investments, there are options to purchase them independently. Websites such as at xCoins.io offer you this option.
Saving for The Essentials in Life
In the introduction of this article, I mentioned leaving a legacy. That refers to primarily your descendance or other groups that you may value. That is very important. However, saving for retirement is equally important. From my experience working in banking, I learned that people invest highly in their kids’ education and even sometimes, for the detriment of their retirement days. It is noble but is it the right thing to get in enormous debt for your child’s education? I understand that many loans are available for your children and their college education. But I believe you should fund your retirement as a priority.
These are a few components of a financial portfolio, and it can seem like an overwhelming task to tackle today. It can take years to get your financial portfolio in the desired state, but it’s recommended that you start as soon as possible. As financial stability is a challenge for many these days, you’ve got to have so many irons in the fire, and having an adequate financial portfolio isn’t just so you can live off the profit, but it’s going to help you live a better life.