Your Best Financial
Planner....is an Educated YOU.
Often people ask me Who
is the best financial planner whom I
know. I always give them the same initial answer. YOU.
Think about it, who knows more
about what you want to achieve, your priorities, your personal concerns and
tolerances ( such as risk) than you
do . And for everyone they are slightly
or very unique so a cookie cutter
approach might work.
Some firms at least
in their TV ads tell you that “we will
get to know you”.. but everyone has
their biases and they need to make money
selling you something so its hard to be objective. Don’t mistake what I am saying here, I am not
saying ignore others
or financial advisors , what I am saying is use
them for garnering information and helping you execute your plan
but don’t delegate the decision making to others.
It’s your life own the decision.
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| Own the big picture don't get lost in the details. |
A successful approach to personal financial planning is very
similar to being a project
manager on a project. What does a great project manager do?
1.
They make
certain they understand the end
result desired and the benefit it will provide.
2.
They identify
risks concerns and resources
available at the start of the project.
3.
They utilize others to gather
information and present
options. (financial education)
4.
They don’t delegate they
make the final decision re what to do
and how to do it.
5.
They turn over the execution (the detail
investments within the plan structure)
to others but monitor progress
6.
If things go wrong or change they
update as required.
7.
And most great
project managers trust their own
abilities because they have put in the
work to separate the valid facts from
the BS.
You are the project manage for your financial success.
Understand the end
result you
desire
The better you can understand the end result that you
want to achieve the better.
I had one friend who’s
goal was to be rich in the future. This is actually different from another
friend who wanted to look rich today.
For me my goal was
that “ I want to live the same lifestyle after I retire as before” . Fortunately I didn’t live a lavish lifestyle before but if I did at least I’d know
what I’d need to achieve success. Having a picture of the end result I wanted helped me stay on target pre retirement. If you goal is to see the world when you retire or to leave significant money to your children you plans might be quite different.
Understand the Risks
Why do you buy insurance?
For the most part it’s because if
something bad happens
it won’t wipe Everyone sees risk differently . Not
everyone buys earthquake insurance on their home,
why because we evaluate the risk vs cost differently. The is no right or wrong but if you identify the risks you can make intelligent decisions that work
for you. Examples
1.
Long term care – what happens if you can’t take
care of yourself
2.
A drop in
the value of you assets.. ie a market crash ..how much can you tolerate and stay
on plan?
3.
Inflation – If you don’t take some risk then
inflation over time could be as bad as a crash.
Once you understand
the risks they you can start making the best decisions for you.
Gathering information.
Where do you get your financial information.
From friends? Do they have the complete knowledge?
One friend tells you draw social security
at 62. Another says wait to 70 to maximize your benefit. Who’s right.
My famous answer is it
depends. For their situation each on
may have given the right information, or
in the worst case they are only looking at
social security and not your
entire financial picture.
If you were managing a project you
don’t make a decision on one part if
it doesn’t make the whole project
better. If you start looking at
the market first ups downs etc. your
focused on the detail, step back and make a plan with a financial strategy that works for you
From Investment companies.
Lets face it they make money by
having you turn your money over to them or give you advice. It helps if you know how an advisor makes money. Some are better than others but
they all have their inherent biases towards their own products or
philosophies.
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| advice about investing is no less confusing |
Example The famous rule you should have 100 minus your
age in equities so if you have $500 then only $200 k should be in equities.
Unfortunately all too often
people and investment advisors etc apply this rule
to their 401k forgetting
they have investments outside their
401k that need to be considered . Suppose you have 200k in cd’s outside your 401k. That’s
700k total so even with the rule equities would be more like 280K. A big difference.
If you are going to have big social security or pension income ( which is
fixed like a bond) then you are
even more out of balance. Again its starting at the top and looking ar
your whole picture before worrying about the details.
k invested
Education
Think about buying a car .
How much research do you do. You talk to
people you trust, you read
websites for reviews you search
for the best price, most people are
quite knowledgeable when they walk into
the dealer. Now it’s just a matter of
how well they can execute the transaction.
The more
often you personally can make the decision about what you want to do the better.
But you still need to gain knowledge.
The simplest answer go to class seminars or read . Many financial companies
or practitioners offer seminars. Of course they have a goal and that’s to get your money.
Now if you are the
one who can’t say no to the timeshare pitch then these aren’t for you as you can’t say no. But if you can then go, ignore the sales pitch and learn something
about the topic they are covering. I go to 5 or 6 a year sometimes just for the free dinner but
only one time did I not learns something. Just remember they are the presenter.. you are the expert project
manager attending to learn and understand by asking
questions to make your project better .
Typically the best ones are the classes that are over 2 or 3 nights and cost a minimal fee 50-150 (max) offered at or through a community college or
similar. $150
that’s a lot you say.
Remember if you have $150,000
invested today that is one tenth of one percent
of what you have invested.
If you can’t make it back 10
times over with what you learned
then somethings wrong.
Mistakes with when to take
social security , 401k
withdrawals, and even some basis tax
tips can cost you thousands.
When I have had a few transactions over the years
that were out of the norm I sought out
experts in and their advice helped me do it right and save a bundle.
Once you have the big
picture then the execution is something
you can direct others to help you with .
Have fun learning and
investing in yourself with knowledge.
