Review Personal Finances

• 1). Identify financial goals according to costs and time frame. For example, perhaps you need $1 million for a Florida retirement within the next three decades.
  
  
• 2). Utilize online financial calculators to make projections for your money management strategy. These calculators allow you to input the amount of money that should be invested at a set rate of return to arrive at a set lump sum. After using the financial calculator, you may determine that your financial goals are not realistic. At that point, you must make lifestyle choices to reduce your standard of living or work to generate more income.
  
  
• 3). List your current cash and asset balances, according to size and expected returns. You may decide to put bank deposits to work in the stock market or sell off bad investments to raise cash.
  
  
• 4). Analyze recent financial statements to calculate free cash flow available to add to your portfolio each month. Subtract monthly expenses from your monthly income to arrive at free cash flow.
  
  

Manage Stock Portfolio

• 1). Differentiate between investment accounts. Retirement accounts, such as 401k and IRA plans, offer special tax breaks, if you leave the money untouched until age 59 1/2. Consider prioritizing putting money into a 401k plan when your employer matches your contributions on a dollar-for-dollar basis. For flexibility in terms of withdrawals, put money into a regular taxable account at a brokerage.
  
  
• 2). Classify asset classes according to risks versus rewards. For example, small capitalization stocks that feature market valuations of less than $2 billion are high-risk and high-reward investments. Small Company X can generate significant stock market profits if it grows into a dominant industry player. Small Company X also is susceptible to bankruptcy, because the strength of larger competitors could force it out of business. Large capitalization stocks, such as Exxon and General Electric, typically are more conservative investments. Your stock market portfolio should become more conservative as you age and near retirement.
  
  
• 3). Invest money over time with dollar cost averaging. Through dollar cost averaging, you break up one lump sum of cash into smaller, monthly investments. Dollar cost averaging forces you to buy cheap stocks amid recession while also helping you avoid putting all of your money to work at the top of the market.
  
  
• 4). Define benchmarks for your investment performance. The S&P 500 tracks the performance of U.S. large capitalization stocks. Consider selling large cap stocks that lag the S&P 500 throughout the economic cycle of growth, recession and recovery.