Do you really need a financial adviser? What do you expect a financial adviser to do for you anyway? You can get a fee only adviser to prepare a financial plan and still fail! A financial plan is just a set of financial goals based on your information! It is just a matter of setting goals and monitoring your progress. Some may call it child’s play. How is it working for you?
Managing your money, investments or achieving your financial goals is not really that difficult! When you are faced with something you know very little about what do you do? If you panic, procrastinate or just do nothing, you are not alone. You just graduated college and stated your career, now what. Obviously, you will work hard to become successful. What about your financial goals, retirement savings or paying down debt. Just because it is money does not mean it has to be difficult.
Money is not brain surgery! Brain surgery is difficult and very few people can do it well. Since everyone uses money, it is not all that mysterious or difficult. The Wall Street people would have you believe that you need a highly paid financial adviser to reach your goals. If you keep it simple, you can easily do what is necessary to reach your financial goals. Besides, why would you want to place your money in the hands of a salesman? Financial advisors earn a fee based on their advice or flat fee for services.
There is so much information online; all you have to do is read it. It ranges from medical, legal business, research, news, investing advice, investing screeners, classes, analysis and much more. All you have to do is look for it. It is very similar to the basis for search engines, just ask the right question and you will get the answer! I have used stock screeners to help me find individual stocks for investment. A stock screener is a tool that investors and traders can use to filter stocks on user defined metrics.
Have I lost you? I may use a stock screener to search for top rated stocks (based on analyst ratings) or use Google to search for stocks in a particular industry sector such as biotech. I have done very well in biotech and I am comfortable with the risk. My research does not stop there! I keep looking for information that will make me comfortable with my choice. If I cannot find enough information, I probably will look at other choices. How do you select investments?
Investing is not guaranteed, but you can do more than you realize! You probably have learned how to use a checking account, ATM, credit card, budget and even make monthly payments online. You are probably very technological savvy with all the electronic gadgets such as smart phones, DVR’s, tablets and a variety of other devices. Believe me; money is easier than those things. It all starts with a commonsense approach to your personal finances and here’s how I do it.
Five (5) Steps for Financial Success
- Start a Savings Account – You probably heard this before, but pay yourself first! Putting money into a savings account is paying you first! It starts with living within your means and then putting aside money into a savings account. You need savings for a down payment for a home, retirement, investing, emergencies, major purchases and retirement. Before you can invest, you need to have something to invest with.
- Retirement Savings – You should contribute to your retirement savings early and regularly. You can use one of the many retirement savings calculators and find out how much you need to save each year to reach your goal. It may be a 401k, 403b, IRA, Roth IRA, SEP, etc, but you should take advantage of these tax sheltered savings plans. If your employer matches your contribution, it is free money and accelerates your returns. You may love your career, but do you want to work forever? If you do not have retirement savings, you will not have a choice, but to work forever!
- Pay Down Consumer Debt – Consumer debt is used to fund consumption rather than investment. It is credit card debt for the purchase of goods or services that are consumable and/or do not appreciate. Consumer debt does not include mortgages or student loans because home values usually appreciate and a college education usually enhances your skills to earn more money.
- Budget – Budgeting in itself just provides a structure for your financial goals. You still pick your spending and saving priorities. You should start with a ten (10%) percent savings goal. Every time you receive an increase or promotion, you can add to your savings. I recommend fifty (50%) percent of those increases going into savings. If you have debt, you should still save for the future because the length of time you invest matters!
- Investing – Investing is personal! Investing is the purchase of an asset or item with the hope that it will generate income or appreciate (increase in value) in the future. You can invest in stocks, bonds, mutual funds, commodities, collectibles, art, business etc. To keep it simple, I use index mutual funds for the majority of my retirement savings. Index mutual funds are a basket of stocks that match or track the components of a market index (Standard & Poor’s 500 index). A mutual fund is an investment program funded by shareholders that trades in diversified holdings and professionally managed. You could keep it very simple by investing in a broadly diversified index mutual fund such as the Total Stock Market. The stock market is dynamic and changes over time, however over the history of the market the return on investment (ROI) has been 8-10 percent. You should monitor your investment choices and make changes if necessary.
Financial goals are just goals! Don’t let them intimidate you just because it is associated with money. If you keep it simple, you can handle money successfully. You can start with making savings a priority, contribute to your retirement savings, pay down consumer debt, budget and invest in broadly diversified index mutual funds. You still need financial goals to know how much you need for all of your financial goals, but yu can keep it simple in your investing. Your success is based on making goals, monitoring your progress and taking action when you miss. You are your best financial adviser!
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