Creating Financial Plans

If you want to do plan your financial life well, you can’t just start investing on your own without taking a step back and looking at the big picture. You need to hire the right professional to guide you.

During a traumatic life transition such as divorce or the death of a family member, your ability to make good decisions can short out. But you can prepare for the inevitable catastrophes that hit us all.

My firm’s clients and prospective clients often ask us which direction the market is going. This is always an entertaining question – and some of our longtime customers already know the answer. While advisors can’t predict the future, they can help you prepare for it to make the best out of what the markets throw at you.

When the facts change, your strategy should change, as well. If you stay wedded to the same investment plan all the time, you lose sooner or later.

I was talking to an advisor earlier in the week about my firm’s preference for tactical asset allocation, which rebalances the mix of your assets based on their performance trend, and weighing the portfolio by risk metrics. He told me a story about how he had allocated money to a tactical strategy that stopped working. This should not surprise a seasoned investor.

Money matters are complex and even scary. How you choose to approach finances mentally is key to mastering them. I call this “money mindfulness.”

It is difficult to deal with your finances on your own because the technical aspects can be bewildering. Investment options, taxes, interest rates and securities transactions in general are overwhelming for folks outside of the finance industry. Few of us understand the math necessary to handle our own money, even at a minimal level.

Investor sentiment surveys tell us that today, with the stock market up since January, there is widespread optimism about future gains. When you hear that, be wary.

When markets move to extreme levels, smart investors often make their largest portfolio gains – by doing the opposite of the popular sentiment. Warren Buffet once said, “Be fearful when others are greedy and be greedy when others are fearful.”

Estate planning can be complex and confusing, but there are only two main methods for distributing your assets to your heirs. They go by daunting-sounding Latin names: per stirpes and per capita.

Choosing one type over the other could have a significant impact on who eventually receives your estate. So what do these two terms mean?

Retirement might be decades away, but it may not come at all if you don’t take stock of your current financial situation today.

For too many hard-working folks, there is a significant gap between the retirement life they desire and the one they can afford if they do not adequately prepare for the future. Traditional goals such as living in an inviting home and devoting time to adventurous travel may not be realistic for you unless you take the time now to calculate how much retirement money you will actually need.

Capitalism is the best economic system in practice for charitable giving because it is the only one that gives us the freedom to allocate our capital as we see fit. But so many people equate capitalism with greed and think that the profit motive is not compatible with giving. This is a wrongheaded notion.

Don’t think that you can just pick up a book and do all of your financial planning yourself. Without the help of a seasoned professional, you can’t make a complete financial plan.