A thoughtful financial plan leaves more money for retirement


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Pay yourself first as part of your budgeting system.

Twenty years ago this month I made a substantial career change from journalism to the investment world.

I had just enough attention to money to make the switch, but far from a strong sense of personal finance, let alone the technical aspects of investment management.

I can’t fully cover 20 years of learning and insight here, but the following are foundational ideas that I have found important when making financial decisions. With proper attention, these ideas could improve your financial security without having to master statistics and odds, investment strategies, taxes, and the larger jumble of numbers and data.

When determining your budget, pay yourself first by saving and investing intentionally, not last by saving only what is left after spending each month. It prioritizes building financial security over building a lifestyle.

Do not send employer correspondence in your company’s retirement plan. It’s a 100% risk-free return on your savings that you can’t get anywhere else.

No one plans to fail, but many people fail to plan. Understanding your current situation and how it relates to where you want to be in the future will help you focus on your options for bridging the gap between the two.

There is no single financial plan. You need to build your plan around your needs, wants, and wishes on your timeline, with your values ​​informing your decisions. This is why it is called personal finance.

Invest in yourself. Improving your knowledge and experience can earn you a salary that exceeds your cost of living. This will allow you to save more, pay off your debts faster, and speed up your quest for financial security.

Humans are not good at making complex and emotional decisions. The impact of your prejudices and behaviors about saving, spending and investing choices is substantial. The standoff between fear and greed will always influence your investment decisions.

Money only buys happiness up to a basic level of financial security. After that, people who seek happiness through money are often left behind in the pursuit of more. Understanding what is sufficient for you is a high level of enlightenment.

Trying to predict the direction, pace or momentum of investment returns, inflation or interest rates is wrong.

Compound ROIs are mathematical magic that cannot be replaced by trying to figure out when to enter or when to exit an investment.

Investing is like building a snowball. It takes effort to get started and the first results may not be impressive, but the growth accelerates the longer you stay there.

Complex and highly designed strategies are seldom better. Keep the majority of your investing approach simple enough to explain it to your less-savvy friend.

Build an investment portfolio that doesn’t need constant attention. The less you have to check, the better your returns will be because you won’t be tempted to tinker as often.

Headlines that attribute gains or losses to a cause are seldom correct. The results of investments are usually determined by a complex combination of many factors, some rational, others irrational.

Most investments have a wide range of potential results, some very good, others that will destroy your desire to hold if they don’t meet your expectations.

Whether you are a cautious investor or an aggressive investor, the best portfolio for you is one that you can stick with when the investment markets move to extremes.

Over time, a thoughtful plan and decision-making process will be more important than luck. In the short term, you will see luck-based results that will tempt your engagement in your process.

If you have a really diverse approach to investing, then you have something that isn’t working well right now, and that’s okay.

Rather than finding specific investments that become big winners, it’s more important for most people to avoid losers.

Your rarest and most valuable asset is your time.

Giving even a little money will make you happy. Be charitable.

Everyone has a will; it’s just that for most people the state wrote it for them. Unless you have no money and no dependents, you need a will, healthcare directive, and financial and medical powers of attorney to communicate your wishes.

Few people need permanent life insurance. More and more people need term life insurance to cover their debts and obligations if something should happen before they achieve financial security.

Use debt to fund things you plan to increase in value (homes, education) and not much else.

Letting the daily financial media influence your decisions defeats the goal of having a financial plan and a documented investment strategy.

No one complains about a minimalist life focused on the essentials. Collect less, experience more.

Gary Brooks is a Chartered Financial Planner and the Chairman of BHJ Wealth Advisors, a registered investment advisor in Gig Harbor.


Louis R. Hancock