Financial Planning: It’s Really Not About The Stock Market Returns

Financial planning is really about so much more than getting good returns in the equity market.  There are many “basic” tools and alternatives to use that actually determine whether you reach the status of “financial independence” – and the timing of when you achieve this goal.  And isn’t financial independence (versus “an x% return”) really the means by which we gain the peace of mind and flexibility that makes our lives easier and more worthwhile?

Here are some concepts that have been used by smart people for many, many years and are truly the foundation for financial independence.  The great news is that anyone can benefit from applying these ideas!  So, dust yourself off from the stock market ride and take a different look at how you are doing in the following areas.

Source: Tax Credit

Source: Tax Credit

Have personal, defined goals to work toward.  Each individual defines their own level of “success” or “happiness” based on their own needs and dreams.  What may be an incentive for one person may be meaningless to another.  And you need to be specific in what you hope to accomplish when choosing monetary goals.  For example, simply stating that you “want to be rich” or “want to retire early” doesn’t define what kind of lifestyle you want, or how much it will cost to support that lifestyle, or how you can achieve the necessary savings.  A more productive approach would be to ask yourself where you want to live, what activities do you want to pursue, and what resources will be available when you reach that point in time.  This process allows you to then project realistic expenses and develop a timeline for all the steps you will want to take to make sure you reach your goal.  Financial planning is a dynamic, multi-step progression – and remember that you always get closer to your ideal goals if you have a well-considered plan.

Spend less than you earn.  Regardless of how much you earn, it’s an indisputable fact that spending less than you earn is the only way you end up with a “surplus”.  How you choose to allocate this surplus – retire early, buy/start a business, help out the grandkids, work part-time, play golf full-time, etc. – depends on your selected goals.  Once you have a clear idea of what you want from life, you can then figure out how much “below your means” you will need to live in order to accumulate the needed funds.  The term “budget” has unfortunately become a very negative word to many people.  However, mapping out your income and expenditures is a proven way to provide you with the information you need to make beneficial decisions and choices.  So why not give it a try – and get a head start on everyone else.

Use debt wisely and only to accomplish defined goals.  Debt usage is probably one of the trickiest and most seductive financial options in existence.  There are no hard and fast rules that debt must always be used or that it should be used indefinitely.  Some authors advocate taking out a mortgage for as long a time as possible (usually 30 years) and then investing your discretionary funds in the stock market.  This approach can work IF you actually set aside the funds for investment and then make a commitment to a balanced portfolio.  But how many times do we go for the lowest mortgage payment on the largest house possible, only to disregard the savings step and instead end up with extra purchases of furniture, vacations, special clothes, electronic equipment, other “must have” items, and, oftentimes, serious credit card debt.  You started out wanting a house, but you end up with a never-ending mortgage payment plus more additional debt than you ever imagined – because you lost sight of your goal of financial independence.  The old economic concept of supply and demand holds true for our individual incomes:  for a finite supply of earnings there is a finite demand you can satisfy.

Protect the assets you have.  You work hard to achieve your goals, so don’t forget to protect the assets you have generated.  Whether it’s your vehicles, your home, medical care (including long-term care), your business or other tangible items, a policy lapse or the wrong terms in an insurance policy can wipe out years of past and future savings.  In addition, failure to prepare the proper legal documents or to actually implement estate planning recommendations could leave your children and your assets unprotected or subject to unnecessary estate taxation.  These are not difficult areas to address – you do need to make them a priority, though, so your true intentions are an actual reality.

Keep up with your OWN goals, not with the ‘Joneses’.  It’s easy to get caught up in the endless competition for a bigger house, newer cars, redecorated interiors, exotic vacations, the latest hot stock tip, or whatever other combination of “acquisitions” seems prevalent.  Except for those individuals who have correctly and consistently applied financial planning concepts to their own situation, I guarantee you that the neighbor with all the toys has all the debt as well.  You are the only one who knows your true financial picture – and your goals – and are therefore the only one who can make a judgment on whether or not you are successful.  It’s your life, and your own choices.  Wear your financial independence as a badge of honor (and smarts – and confidence) and skip the hidden pitfalls of competition.

For more helpful financial information . . .

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Laurie Bonser CFP, CPA, Coach
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Laurie Bonser CFP, CPA, Coach

Laurie is a musician, teacher, intuitive reader, and shaman who also practices Reiki, MAP, plant spirit medicine, animal communication, and other healing resources.As a CPA, Certified Financial Planner™ professional, and coach, Laurie has extensive expertise and credibility in the area of comprehensive financial planning for individuals and business owners.She focuses on working with clients who value the integration of thoughtful financial stewardship with their own health, relationships, intentions, and envisioned futures.Laurie is the author of “Financial Stewardship:A Guide for Personal Financial Health and Wellness,” an Amazon bestseller for 2014.She lives in Ballston Spa, NY and may be reached through her web site at www.ChangingTimesPlanning.com.
Laurie Bonser CFP, CPA, Coach
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Laurie is a musician, teacher, intuitive reader, and shaman who also practices Reiki, MAP, plant spirit medicine, animal communication, and other healing resources. As a CPA, Certified Financial Planner™ professional, and coach, Laurie has extensive expertise and credibility in the area of comprehensive financial planning for individuals and business owners. She focuses on working with clients who value the integration of thoughtful financial stewardship with their own health, relationships, intentions, and envisioned futures. Laurie is the author of “Financial Stewardship: A Guide for Personal Financial Health and Wellness,” an Amazon bestseller for 2014. She lives in Ballston Spa, NY and may be reached through her web site at www.ChangingTimesPlanning.com.


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