Unlike a Super Bowl party, investing isn’t something you throw together at the last minute.
One has to actually think and identify exactly what and how much money they will need at some point in the future… BORING! Sadder still is that 95% of people will take more time planning their next two-week vacation than taking time to sit down and figure out how they will eat in their golden years. And we get that; financial planning is maybe one spot ahead of getting a root canal, for most people, and especially women. But just as one wouldn’t normally attempt to cut one’s own hair or fill in a cavity in their tooth, getting help with financial planning is really easy too.
Step one, what are you saving for first? Are you saving for college, buying a home, or preparing for retirement? Making oneself a goal is the best starting point to any well-planned investment program. Can you imagine going to a travel agent and telling them you want to go somewhere without giving them a least some criteria, such as a beach, mountains, city or remote locale? Duh, same with investing. What do you want the money you invest and ultimately grow (hopefully) to do for you?
Without a goal anything or nothing will likely end up being an uncomfortable destination. Second, it’s ok to know that you don’t know. Recognize you may not have enough information or education to make a good financial decision much less a complete plan. Factors such as your age, income, amount of debt and kids (or maybe even parents) to support will give you great starting points.
Have you ever went on a diet or tried to lose weight? What was the most common reason for not losing the weight you desired? Typically it’s time. We do not allow ourselves enough time to save nor time for money to grow before we either a) give up or b) start withdrawing the money we have saved or earned. You have to have patience and perspective. Would you prefer to have $1 million handed to you today or given a penny that doubled in value every day for the next 30 days and receive that instead?
Most of us would want the $1 million today, but by doing the math, the penny doubling every day in 30 days would be worth $5,368,709! This is due to what Albert Einstein called the 8th wonder of the World: the power of compounding. Making interest work for you instead of against you is paramount! Third on the list is efficient income tax planning.
Using the last example of the penny doubling every day for thirty days, now let’s take out income taxes each day from the calculation. Assuming you’re in about a 35% tax bracket (including federal, Social Security and (FICA) and possibly state income taxes), do you have any idea how much less “after tax” money that penny is worth? $20,278.43! So tax deferral such as offered in a 401k or an IRA is critically important!
There are millions of websites that offer help on planning for the do-it-yourselfers. You can also ask your friends and peers who they use for their planning advice. Funny thing is you will find that you can easily ask 5 or 100 financial advisors their opinion and advice and none of them will likely charge you a penny to help until you “hire” them as YOUR advisor.
So ask around, it’s free and you have nothing to lose but your golden retirement by NOT asking. And you do not have to select just one either. Use the ones you like and allow them to collaborate. Just as if you were diagnosed with an illness that maybe required surgery, wouldn’t you seek out second and third opinions? Duh, of course you would, or at least should. After all, after your health what’s most important…?
