Fall is a dramatic change of seasons. It feels like time slows as we transition from the hustle of summer activities, put away the toys, harvest the garden and prepare for the coming winter. With transitions and the traditional back to school season, it’s no surprise that October is also National Financial Planning month – time to refresh our personal finances. I’ll share key areas of financial planning to review and three things smart savers do.
A good financial plan is holistic. Your goals often are being independent and having choices (financial freedom), not being a burden on anyone (the long-term), planning for life’s surprises both good and bad (uncertainty), and taking care of your loved ones (family).
Components of financially planning include:
- Cash flow
- Saving and investing
- Tax reduction
- Retirement planning
- Insurance and risk management
- Estate planning
- Employee benefits
- Business considerations
They’re inter-related. One area that becomes healthy (or stagnant) tends to cure (or infect) other areas. For example, focusing on your budget to eliminate debt generates surplus to build cash reserves (rainy day funds), to save and invest, and to build retirement. You may be very competent in some areas and DIY, and for others it may be better to hire an expert.
A key consideration when you delegate – in addition to expertise, experience and reasonable cost factors – is the personal relationship. You’re going to be sharing your most personal hopes and fears. You want someone who will ask the right questions, help you manage life’s transitions – and more importantly, anticipate them, and share relevant and valued resources.
Here are three things smart savers do.
Have a written plan
Denis Waitley said “Expect the best, plan for the worst and prepare to be surprised.” Writing down your goals increases the probability of success. And having a written financial plan provides a basis for accountability, milestones to be celebrated, and serves as a road map to keep you on track.
Develop great habits
Discipline, commitment and consistency go a long way whether it be relationships, work or personal finance. One of the biggest keys is managing cash flow and save. A favorite client says “We know how to save… not a penny, but a hundred.” History shows us that the fanciest investment strategy does not compensate for a lack of savings. And the best habits are often the ones we develop the earliest.
Have faith in the future
Life’s full of surprises both good and bad. Sometimes when times are toughest is when it’s best to put your head down and grind it out. Control what you can and forget about the rest. Thomas Malthus was an 18th century economist best known for his theory on overpopulation. He believed that mankind would perish because population growth would outpace food production. He and his followers, known as Malthusians or pessimists, exponentially grow the problems and straight line the solution. They fail to consider mankind’s ingenuity and creativity – in this case advancements in food productivity. Often, we’re at our best when times are darkest.
Your financial success depends on you taking action. Seek sage advice at any age and secure your future wisely.
This article can also be viewed at the Reno Gazette Journal.