Editor’s note: Judy Loy is on vacation. Dan Nestlerode submitted a personal finance column in her absence. Judy's column will appear when she returns.
You might wonder from time to time what is going on with the economy. Why are 9 percent of our workers unemployed? Why are home prices still falling? Why can’t Washington either balance or pass its budget on time? How come the stuff I buy just seems to get more expensive even though I am told we have no inflation? Why do we have a trade deficit? Who is managing our economy? Why is the stock market seemingly doing well despite all our economic problems? How am I supposed to figure out what to do to get ahead financially?
With a family to support, a job to perform and all that entails, who has the time to deal with the economy? Family and career take just about all the time a person gets these days. Yet no matter how pressing the day-to-day stuff is in your life, time is marching on and, eventually, if you live through this phase of your life, you will get to the end of your working years and hopefully enjoy retirement. Humans can think ahead, plan and act in the present for our future.
In the interest of getting ahead financially, here’s a great place to start, and it’s not really a mystery. It involves looking at your financial commitments – current and prospective – and adjusting your spending and income so that money accumulates to handle your future commitments. Although it doesn’t help when the government monkeys around with the value of the currency, set that issue aside and just make sure your income exceeds your current expenses. Accumulate extra as fast as you can in a safe and secure investment. Develop good income and spending habits right now.
The financial planning part of life is really easy. Unfortunately, many so-called financial planners are just salespeople looking to sell you a product or plan on which they make a commission or other fee. You need to separate your plan from their product or service. Too many financial planners are great at dealing with people and not so great at dealing with the range of products and services Wall Street would like them to sell to you.
So after 46 years of dealing with folks, here is my answer for firming up your fiscal house. First, make a list of your current and future financial commitments. Then, put numbers to these commitments (they don’t have to be exact – ballpark numbers are a good place to start). Now, look at your income and see how well you have handled things so far. Do you have month left at the end of the money or money left at the end of the month? Start running your financial life so there is always money left at the end of the month. Accumulate your excess in safe, secure investments such as a savings account, CDs, money market funds and similar places.
As your money accumulates, take your plan to several investment advisers and ask them how they can get on board with you to help you reach your financial future. In my opinion, you should be looking for a person or firm that pays attention to your investments, tracks their performance and can show you periodically how your investments are progressing toward your future commitments. It is your adviser’s job to answer all those questions about government, the economy and the markets and to select those investments that work for you right now.
A good investment adviser will:
- always keep you in the game by avoiding catastrophic losses
- minimize losers in your portfolio
- and will constantly pay attention and measure your portfolio and study all the macro stuff that might affect it.
There is no single right way to proceed at any time, and there are many midcourse changes and corrections usually needed. Form a long-term solid relationship with your adviser and his or her firm, because planning is a continuous process and is never really completed. It must change and adapt as your life situation changes and as the investment markets change.
I hope this makes getting started, whatever your age or circumstances, just a little easier. Notice how easy Washington would have it if they always had money left over at the end of every month? Maybe they could start their financial plan by not making commitments they cannot keep.