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Guest post by: Raju Pathak Become an Author

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Given the turbulent nature of our financial markets, many prudent investors are reassessing their positions as well as their long-term objectives, and with good reason. Since 2008's downturn, many wealth managers and financial advisors have adopted a more holistic approach to planning for their clients' futures. A large number of today's private investors have taken-on a similar approach as well, which places an equal amount of focus on fiscal needs as well as quality of life, more in-depth retirement planning, long-term medical care, philanthropic preferences and more strategic estate planning.

Because current economic conditions are key drivers of life-long financial plans, the need for reassessment and, in many cases, realignment, is now significant. In addition, because reaching financial goals most often requires more than just good investment management, advisors and investors alike are embracing models for more comprehensive wealth management.

5 Critical Areas to Consider

If you are considering making adjustments to your long-term financial plan, or if you are just beginning the process for the first time, here are five critical areas of focus based on historical data, today's economic conditions and the likely recovery time:

1. If you are still working, reassessing how much longer you will work, or re-calculating when you can comfortably retire, is the first step. One of the most frequently-asked questions we encounter is, "Will I have enough money for a comfortable retirement?"
   
   As I'm sure you know, most investment portfolios and retirement funds have been significantly impacted by market drops, changes in lending policies and rising health insurance costs. On average, people are finding that they'll need to work at least an additional three to five years in order to retire with the same degree of comfort that was associated with plans crafted prior to 2008.
   
   
2. Reviewing your savings strategy is the next step. Increasing your current savings plans might be an option for an investor hoping to avoid making significant changes to long-term expectations or to their retirement plan; simply stated, by saving more you might still be able to adhere to timetables for retirement or income streams that were crafted prior to 2008.
   
   In addition, and consistent with the concept presented in item number five below,enhancing your savings plan can also have a positive effect on your confidence and stress levels, often resulting in more prudent, objective decision-making.
   
   
3. Cutting expenditures is a strategy that goes hand-in-hand with step two above. By more closely managing and reducing your spending habits you can impact both the amount of money you will have available for savings as well as the target return rate that is necessary to achieve your long-term goals.
   
   More careful spending habits also tend to increase confidence levels and lower stress levels, once again promoting more prudent, objective decision-making.
   
   
4. Managing risk differently is the next step. In many cases, and as noted above, increases in savings coupled with decreases in spending will enable an investor to adopt a less risky position, simply because these activities lower the target rate of return that is necessary for long-term goal achievement.
   
   However, prudent risk-taking is a major component of prudent wealth management. There are times when added risk is justified or necessary. The key is, of course, to identify the right amount of risk based on all factors - long-term needs, risk / reward analyses, personal circumstances and current market conditions. Given how these conditions have changed over the past year, it is only logical that risk management should be adjusted accordingly.
   
   
5. Avoid panic and fear-based decision-making, as this approach almost always leads to sub-optimum or poor results over time - not to mention the negative effect it has on personal stress levels.

A good way to avoid these pitfalls is to review your position more frequently. I'd suggest a quarterly or six-month reassessment schedule for the balance of 2011 and probably most, if not all, of 2012. More frequent evaluations tend to assuage the nerves and help develop consistency in financial planning. The key is to keep long-term objectives in mind, but to modify expectations and tactics based on the ever-changing markets.

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