Gaining financial confidence in an uncertain world

By Katie Phifer
Let’s begin by stating the obvious: Life can be uncertain. You can’t control the wind. Or the rain. Or what happens in Washington. Or the driver of the car in front of you.
This may feel especially true when it comes to managing your personal financial affairs. Some investors find themselves overwhelmed with information and conflicting advice. Others don’t have the time or interest to manage their personal assets and liabilities with discipline.
Take, for example, planning for retirement, your children’s or grandchildren’s education, and other major financial goals in your life. How much is enough? A common misconception is that you start investing by buying something. In fact, purchasing investments is just one part of a much bigger picture. Think of it this way: You wouldn’t set out on a family trip this holiday season without having a destination and a route to get there. In the same way, before you start investing, you have to have a goal in mind.
As you answer the question of how to meet your specific goals, you generally should consider a reasonable rate of compounded growth, as well as principal erosion through taxes and inflation and the possible impact of ongoing market changes. But few people have the knowledge or the time to do this on their own.
Traditional planning can create an illusion of stability. But nothing happens every year exactly as predicted. Goals change with your station in life — and financial and market conditions are constantly changing as well.  You can’t have a financial plan and put it up on the shelf to collect dust — it needs to be a “living, breathing document.”
Consider again the goal of planning for retirement. What happens when you begin drawing down your wealth once you begin retirement? How much can you safely withdraw each month in your retirement? This will depend on your investment returns, the inflation rate, changes in your health or marital status, whether you live beyond your life expectancy and other factors.
As you take inventory of your important financial goals and prioritize them, know that proper planning can help provide a picture of financial strategies. However, past performance is no guarantee of future results. Through periodic reviews of your goals and the performance of your investments, you can assess how your actual investing and spending patterns affect your chance of success in meeting your goals. With this information, you can make changes as needed to keep your plan on track toward your unique financial objectives. There’s no substitute for common sense, a realistic and comprehensive plan that accommodates uncertainty, and sound financial advice from someone you can trust.
As 2011 comes to an end, here are a few year end planning opportunities that may  help get 2012 off to a great start:
• Meet with your advisor to do year end investment reviews;
• If eligible, make sure you have taken your 2011 Required Minimum Distributions from your retirement accounts;
• Consider 529 gifting to help lessen a tax liability and financially prepare for higher education expenses;
• Take advantage of tax loss harvesting to potentially lower taxes on capital gains;
• Review your beneficiary designations;
• Consider  year end charitable gifting.

This article was written by Wells Fargo Advisors and provided courtesy of Katie Phifer, CFP® Financial Advisor at 843-524-1114.
Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE
Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.

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