How to Develop Your Financial Profile

Creating cash flow every month isn’t an accident, it’s a deliberate act of spending wisely and saving for the future with a budget. When there’s money to invest, many look to professional advisers, because for most, managing your finances is not a do-it-yourself activity. But even with help, you still need to develop your own risk tolerance, financial goals and life events along a timeline. There are several risk tolerance tests available online and through various financial institutions. They ask probing questions that can help you establish a baseline for your financial decision making process. After having your test evaluated, you may discover you’re not who you think you are. For example, a type A “driver emotive” personality may have a portfolio that’s aggressive, but his risk tolerance test results may actually reveal a moderate conservative. Many 401(k) portfolios don’t match up well with their participant’s risk tolerance test results. Tom Hegna, best selling author and economist, often talks about this when he addresses purchasing financial products for retirement. Watch the video interview at: https://youtu.be/3mLkh2jtykU.

It’s important to establish a financial timeline that reflects the many life events along the way; like getting married, having children, buying a home, saving for college and weddings, contributing to a retirement plan, creating funding for long term care and leaving a legacy. But the most important part of creating a financial timeline is establishing life expectancy, especially for funding retirement and the long term care and medical events that occur as seniors grow older. The Guinness Book of World Records documented that a woman in France named Jeanne Calment was the longest living human at 122 years, 164 days at the time of her death. Gerontologist Dr. Aubrey de Grey says the person who will live to 150 years has already been born. So developing a life expectancy report and a risk tolerance test are two critical steps in developing a financial profile.