The Impetus and Approach to Sound Financial Planning
Following established trails up a forested mountain does not resemble devising one’s own advance of the contours of a snow or ice-covered alp. One requires a modern map; the other requires deep study and an intimate knowledge of the topography to be traversed. I recall using three software programs to carefully plan our first climb of Mt. Whitney’s Mountaineer’s Route in 2010, which in a white-out would have led us to an impasse right under a massive unstable cornice! Good visibility exposed the error from a mile away, but seldom does ineptitude prove inconsequential in such a hostile environment. The achievement of your personal and financial goals in today’s world is equally complex, which reveals the impetus of a formidable challenge laden with deadly pitfalls. Consider the framework of a successful plan, customizable to particular family dynamics:
Identify and prioritize primary financial goals, such as a comfortable retirement, funding a child’s education, buying a second home, or creating a succession plan for your business. Be as specific as possible in defining each objective.
Map each goal separately with a conservative time frame in mind. It’s far easier, and far less disruptive to other priorities, to push an outlay back than to pull it forward.
Fund each objective with a separate investment account, as varying time frames will result in distinct risk levels, return objectives, and funding requirements.
Use every tax advantage available to you in the pursuit of each goal, realizing the best tax plan results in the lowest lifetime tax, not necessarily the lowest present year tax.
Use every financial principle at your disposal in the appropriation of your hard-earned, God-given capital. Become well acquainted with timeless financial principles, like diversification, dollar-cost-averaging, dividend compounding, position sizing, maintaining an exit plan, and rebalancing risk.
Keep investment expenses at a minimum, which directly reduce investment returns and the probability of achieving your goals.
Annually monitor progress towards each endeavor and adjust risk/allocation, return objective and funding commensurately.
Like mountaineering, financial planning consists essentially of identifying specific priorities, appropriating resources towards those ends while applying every principal advantage, and then adjusting the approach as progress is consistently monitored. God bless your planning efforts!
Shaun
“A wise man thinks ahead” ~Proverbs 13:16
“The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty” ~Proverbs 21:5
“For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?” ~Luke 14:28
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the author.
Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. Investors should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not insure a profit and does not protect against loss in declining markets.
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