The one thing we all share in common is our desire to achieve financial security. For most people, financial security means financial independence – the ability to meet all foreseeable financial needs out of their own resources. In other words, financial security means being able to afford to retire, whether one wants to retire or not. Everyone wants to be financially independent by the time they retire, but many fall short. Along the way, during our working years, we all want the financial security of being able to cope with whatever financial demands might be placed on us – buying a home, educating the children, and surviving disability, unemployment, or the death of a breadwinner.
You don’t have to be lucky to achieve financial security. But you do have to work at it – and, of course, the earlier you begin, the easier financial security will be to achieve. As the following shows, achieving financial security entails many different tasks. All of them are important, and each merits your attention. Please feel free to share this with younger generation family members.
FORMULATING OBJECTIVES. You can’t get there from here unless you establish some important personal financial-planning objectives, both for the near term and later on.
INSURING THAT YOU HAVE ADEQUATE INSURANCE. Always maintain continuous and comprehensive insurance coverage.
NEVER GIVING UP CONTROL OVER YOUR MONEY. Don’t let other people tell you what to do with your money before assuring that they have your best interests in mind. You are your own best financial planner.
ALLOCATING YOUR INVESTMENTS APPROPRIATELY. Deciding how to apportion your investments among stocks, interest-earning securities, and real estate is crucial to your investment success.
CREATING A NEST EGG. There’s nothing like money in the bank to give you financial peace of mind. Kick the spending habit and get hooked on saving regularly.
COPING WITH MAJOR LIFE EVENTS. Life deals each of us a variety of cards – some are good and some are not. Preparing for the unexpected helps minimize financial disruptions.
INVESTING WISELY. Learning about how to invest and putting your knowledge to work are two of the most important ingredients to your achieving financial security.
ASSURING THAT YOU MINIMIZE INCOME TAXES. Income taxes take a large chunk out of your income, and there is no reason to pay any more than the minimum that the law obligates you to pay.
LEARNING TO LIVE BENEATH YOUR MEANS. The only way to accumulate the investments necessary to achieve financial security is to spend less than you earn, and the only way to spend less than you earn is to live beneath your means.
SETTING YOUR RECORDS STRAIGHT. Organize your records and prepare personal financial statements to get a better handle on your finances.
PLANNING YOUR ESTATE. You’ll not only be doing your heirs a big favor by preparing the necessary estate-planning documents, but you will also benefit during your own lifetime.
MEETING COLLEGE EDUCATION COSTS. The best way to meet college education costs is to undertake a realistic savings plan when the kids are young, then become familiar with the financial aid process as they near college age.
USING CREDIT WISELY. Credit can be useful to achieving financial security, or it can destroy your financial security. It all depends on how you use it.
PARTICIPATING IN RETIREMENT PLANS. Maximize your participation in tax-advantaged retirement plans to help assure a comfortable retirement.
INVESTING IN YOUR CAREER. Devote the time necessary to improve your skills and advance in your career. Your career is your most important income-producing investment.
TAKING THE TIME TO ATTEND TO YOUR FINANCES. The time you spend to work on your personal finances is always time well spent.
YOU’RE RESPONSIBLE FOR ACHIEVING FINANCIAL SECURITY. It’s up to you to take the actions necessary to achieve financial independence.
Smart Money Tips
- Plan ahead for budget busters. There’s nothing like a “budget buster” to wreak havoc on a carefully prepared budget. Even if you’re not at all interested in budgeting, you still need to prepare for unanticipated, but inevitable big-ticket expenses that come along from time to time. Examples include home repairs and maintenance, car repairs, replacing cars and appliances, and expensive dental work or other uninsured medical costs. Even some annual expenses, like a vacation or the holidays, can crunch the family budget if you don’t prepare for them. Ideally, you should set aside money regularly in a separate savings or investment account to build up a cushion to pay for budget busters. Unanticipated, nonrecurring expenses can be especially problematic for retirees. In fact, if you’re retired, you may need to earmark half or more of your Social Security check just to pay for budget busters.
- Safe deposit safety. Do you have a bank safe deposit box? Your bank almost certainly does not insure the contents, so you may wish to consider extra coverage on your homeowner’s or renter’s policy for safe deposit box contents if you store any valuables therein. It’s cheaper to insure any possessions that are stored in a safe deposit box than it is if they’re kept at home, so if you’ve got valuables at home that you don’t use or display, consider putting them in your safe deposit box.
Food for Thought
The only person wise about the future is the person who keeps silent.
-John Kenneth Galbraith
Money Can Be Funny
The more I see the moneyed classes, the more I understand the guillotine.
-George Bernard Shaw
Word of the Week
prorogue (pro-ROHG) – 1. To discontinue a session of something, 2. To defer or postpone
Origin: from Latin prorogare (to prolong or defer)
Washington, DC is empty this summer since the Congress is prorogued in order to allow its members to campaign. So nothing gets done in the District which is pretty much the same as when the Congress is in session.