Smart Financial Concepts
Experienced mountaineers know precisely where every utensil is at all times, whether on the person or in the pack, and can find it quickly in the dark. I’ve seen a 50-Year-old man throw a public tantrum and miss ‘summit day’ on an expensive climb due to his ignorance of this rudiment of team climbing. Many mountaineers are dead for not knowing that on a steep glacier every essential item must constantly and securely be attached to the harness. I read of a man who chased his pack into a 2,200-foot-deep crevasse on Denali as he discovered too late the importance of this mountaineering axiom. Essential is the aid of proven practices while engaging in dangerous activities, whether it be mountaineering, motorcycle racing, or managing one’s financial life. Benefit from the following smart financial concepts as you successfully plan your financial future:
The benefits of scrutinous and creative thinking are immeasurable. Every American must identify and discard harmful monetary notions, partly because financial principles aren’t taught in school, and partly due to rampant cultural materialism. Denying oneself unnecessary comforts and enjoyments can create a world of life-changing opportunities. Prior to a large, off-budget expenditure, ask yourself if there exists a more productive use for the dollars, whether it be to fill a gap in your own retirement plan, or by someone else in need.
Prioritize contentment above financial wealth, for there is no definite connection between the two. Discover by trial and error your greatest interests, and whether it be birdwatching, nature-walking, or astronomy, replace habitual consumerism with the simple things that bring you joy. This powerful idea in action both improves quality of life and reduces probability of financial hardship.
Realize the danger of debt and understand it only makes financial sense to borrow money if that money is invested productively. Maintain a relatively small level of debt, never carry consumer debt, and never retire while in debt.
Understand the difficulty of replacing a large portion of your earned income for decades in an inflationary culture and use every means and month at your disposal in its attainment. Once the financial foundation of debt management, a positive cash flow, emergency savings, and the right amount of the right type of life insurance is in place, pay yourself first by investing 20% of your income for retirement.
Understand the value of income, earn it as long as possible, and invest primarily in things that produce it. Non-income producing investments generally carry greater risk and are incapable of leveraging the greatest wealth-building principle on earth: compounding. Increase the probability your income will survive you by annuitizing a modest portion of your total retirement capital.
Manage catastrophic market risk with position-sizing and stop-loss orders. It’s not what you make that counts, it’s what you keep.
Acknowledge the probability of meaningful tax increases in America and apply a smart tax plan to prepare for it. Uncle Sam is co-owner of all traditional retirement accounts, so stop believing the whole account is yours. Utilize taxable Roth Conversions to maximize the taxes you pay in lower brackets, and traditional, deductible contributions to minimize the taxes you pay in higher brackets.
Leverage these practices for your own benefit and teach them to your children while they are young.
Think about it, Shaun.
“A good man leaves an inheritance to his children’s children.” ~Proverbs 13:22
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.
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