Understanding the Facts

In an earlier post, Do I Have Enough Money, I outlined the first step, gathering the facts. In this post, I will help you to analyze and understand the facts.

Understand the Facts

Analyze your Financial Information. When you have all of that information gathered really take a cold, hard look at it-are there any surprises? Should you anticipate any surprises? What if your husband died? Would your income be sufficient to cover your expenses and your lifestyle? Do you need to create wealth in the short term? On average one million dollars, when prudently invested will generate about $50,000 of income. You will need three million dollars of life insurance to replace a shortfall of $150,000 in annuals income. When you are in the wealth building phase life insurance can be purchased so that if something happened before your assets build up wealth is available for the family.

If you are older and insurance is not a good option are you spending too much money?

Will your investments hold their value and sustain you through the duration of your lifetime? Should you make adjustments? There are all kinds of models and computer simulations available today to provide an answer. With the help of computerized mathematical tools, for example, a financial planner can program in your current and projected financial needs, you investment portfolio, and hundreds or thousands of market-condition scenarios to determine whether your investments will last throughout your expected lifetime. In the Monte Carlo simulation-one of the most popular-if your portfolio is run through 10,000 projected retirement scenarios and it shows it is sufficient 8,000 times, that means there is an 80 percent probability that your current portfolio will not run out of money. Then you must decide what your tolerance for risk is-how low the probability of running out of money must be in order to make you feel comfortable.

Take the time now to analyze your Financial Information. If you have any challenges or need additional information please feel free to comment below.

Check back next week for my post Financial Vulnerabilities. This will help you analyze additional facts you have gathered.

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