How Do You Approach Financial Planning?

Financial planning is a highly personal process, and it looks slightly different for everyone. In this segment of Backstage Pass, recorded on Dec. 22, Fool contributors Rachel Warren, Danny Vena, and Deidre Woollard respond to a member’s question and share their individual approaches to building a stronger financial future.

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Rachel Warren: Let’s see another question from Vihaan that just came in. What are different investment accounts to stocks one can hold: traditional brokerage, traditional IRA, Roth IRA, anything else?

Can you please talk to how The Five team are diversified, percent of capital in taxable and non-taxable? Either of you want to jump in on that and then I’ll close out with my thoughts.

Danny Vena: I’ll just say quickly, I don’t have a specific percentage that I put in one account versus another. My personal investing situation changed several years ago. We moved from Colorado to California.

The amount of money that I invested in my taxable account decreased because I needed money to pay my mortgage.

But I still try to keep the same amount of money going into my retirement account because when I retire I don’t want to eat cat food. [laughs] I would say that’s a really personal situation and I don’t think you’re going to find any set percentages that is a one-size-fits-all for all investors.

Warren: Great. What about you Deidre, do you have any thoughts you want to add?

Deidre Woollard: I also don’t want to eat cat food.

Warren: [laughs] I think we can all agree on that one, right?

Woollard: Yes. I’d like to keep a fair amount in my retirement accounts. I also like to keep things like REITs in, they go so nicely in IRAs because all the dividends just sitting in there and growing and that’s a really nice thing.

I think it’s absolutely a personal thing for every investor. I think you’ve got to have your emergency funds and everything like that set up before you start contributing heavily to your retirement funds.

Warren: Yeah. And I can say for me personally, I do not currently have a traditional retirement fund in place. I’ve been focusing on building my stock portfolio and I also regularly add to my emergency fund, as well as just my investing capital that I can use to continue to boost and grow my portfolio.

As a freelancer, I don’t have a traditional retirement account, that is one I could perhaps open in the future, but for now, that has not been my personal focus. In terms of diversification, I would just say I personally diversify the stocks that I invest in across a range of industries, primarily healthcare and tech as of now and I generally try to invest on equal weighting in my stocks.

But as I’ve mentioned before on the show, I’m a newer investor, and I have not built up to the amount of stocks in my portfolio yet that I want to have. But again, it’s personal and different for everyone for sure. Thank you for that question.

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