Journey to Point X (Financial Independence): Ten Steps to Get You and Your Finances Where You Want to Go
HOBOKEN, N.J., June 5, 2013 /PRNewswire/ -- After the 2008 economic meltdown, it became stunningly obvious that many Americans had not managed their finances well. What we learned was that many people lived paycheck to paycheck, had mortgages they couldn't afford, and weren't putting money away for their kids' college or their own retirement. Financial advisor John Vento says it's time for Americans to make reaching financial independence—or their Point X, as he calls it—a top priority.
"Financial independence is the spot at which our savings and investments alone generate enough income to support our chosen lifestyle, and allow us to continue to live that lifestyle without having to work for a paycheck," says Vento, president of his New York City-based Certified Public Accounting firm, John J. Vento, CPA, P.C., and Comprehensive Wealth Management, Ltd., as well as the author of the new book Financial Independence (Getting to Point X): An Advisor's Guide to Comprehensive Wealth Management (Wiley, 2013, ISBN: 978-1-1184-6021-4, $40.00, www.ventocpa.com).
No matter how you define your particular Point X, you need to effectively deal with ten fundamental wealth management issues. Read on for an overview of each one of them:
Live within your means. "Living within your means" is living on less than your take-home salary and any other resources you receive such as income from an annuity or a trust. It does not mean existing from paycheck to paycheck or relying on credit or loans.
Understand taxes. Most people do need help from professional tax advisors to benefit from tax strategies; however, you should have enough basic knowledge about taxes to ask the right questions and find the appropriate help.
Determine your financial position. "Get a precise understanding of your financial assets, liabilities, and net worth," notes Vento. "You also need to know where all your personal funds are coming from and going to. Finally, you must determine your financial goals."
Manage debt. Understand the difference between bad debt and good debt. Good debt is money that people borrow to help them amass wealth in the long term and ultimately reach Point X. Bad debt is money that people borrow for the purchase of nonessential expenditures.
Insure your health and life. You must prepare for unforeseen problems concerning health and life. Your particular situation will determine what type of insurance you need, what kind of policy or policies will work best for you, and the amount of coverage you should carry.
Protect your property with insurance. You should consult with your insurance agent or broker to fully evaluate your needs so that you can determine proper coverage. And remember to always secure your new insurance coverage before you drop your old policy.
Pay for college. Take advantage of college savings programs such as Internal Revenue Code Section 529 plans, Coverdell Education Savings Accounts, savings bonds, financial aid, as well as education tax deductions and credits.
Plan for retirement. The easiest way to save is by contributing to your employer's retirement plan or to an individual retirement account (IRA). Allocate a specific dollar amount or percentage—Vento recommends at least 10 percent—of your salary every pay period.
Manage your investments. Select an investment model that you are willing to stay with, even in the worst of markets.
Preserve your estate. "Estate planning can give you peace of mind by assuring your family's financial security will continue even after your death," says Vento. "It can significantly reduce estate taxes, administrative costs, and assure that your loved ones will be taken care of."
"Financial independence, or Point X, is the financial ideal that we all seek," says Vento. "With the right plan, anyone can reach their Point X…but you have to be dedicated to making lifestyle changes and taking the necessary steps to achieve financial security."
About the Author:
John J. Vento is author of Financial Independence (Getting to Point X): An Advisor's Guide to Comprehensive Wealth Management (Wiley, 2013, ISBN: 978-1-1184-6021-4, $40.00, www.ventocpa.com). John has been ranked among the most successful advisors of a nationwide investment service firm and has held this distinction since 2008.
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Financial Advisor, John J. Vento
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John J. Vento, CPA, P.C., and Comprehensive Wealth Management, Ltd., are not a registered broker/dealer or independent investment advisory firm.
SOURCE John J. Vento
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