Contrary to popular belief, long-term financial success does not hinge on earning a large salary or being fortunate enough to be born into wealth. In fact, it is common for high-income earners to end up financially worse off than people who earned much less. The difference amounts to more than saving money for a rainy day. Most wealth strategists will agree that savings are only one component of a financial strategy. The foundation of long-term wealth begins with creating disciplines in five key areas, as outlined below.
Step 1: Make A Commitment To Having Open And Honest Conversations About Money
Families that talk openly about money are generally well prepared. It can be difficult to jump-start this type of conversation, especially when difficult choices have to be made. However, avoiding discussions surrounding money only creates resentment and fear. Pushing past this resistance and having the conversation about financial concerns out loud (i.e., if the breadwinner of the family loses their job) can relieve a lot of the tension and get everyone on board at the same time.
Step 2: Gather A Team Of Trusted Professionals
Trying to figure out a financial road map on your own is a recipe for failure, as there can be a lot of unforeseen details of your financial health to take into account. It is equally unwise to trust a professional advisor whom you have not thoroughly researched and checked out. Ideally, you should always ask for a personal recommendation from a trusted friend with further investigation done on your own.
Step 3: Write Down A Plan And Review It Regularly
Do you know how much it will cost you to retire, send your children to college, and enjoy your lifestyle along the way? Have you figured out how much you need to invest? Or what rate of return your investments need to produce to stay ahead of inflation and taxes? A financial advisor can help you put together a plan based on your current income and expenses. It is equally critical to review your bank statements and retirement account statements at least once a quarter, or ideally once a month, to determine if you are on track to meet your goals. Software like Quicken or Mint can make this process much easier by keeping a history of your expenses by category year after year, allowing you to see more accurate projections of how much income you will need.
Step 4: Prepare For “What If” Scenarios
Medical emergencies, major home repairs, caretaking of loved ones, and job losses are just a few of the unforeseen situations that can drain a family’s much-needed cash flow and sometimes require tapping into retirement funds sooner than expected. Planning and strategizing for these situations before they happen is key to protecting yourself and your family should any of these “what if” situations happen. One such strategy is making sure you and your family have the right mix of insurance policies and assets that can withstand the future ups and downs of the economy.
Step 5: Raise Your Awareness
If you find yourself prone to habits such as impulse shopping, eating out too often, or failing to pursue opportunities to increase your income, recognize that you can change your habits—and that change takes time. Once you are aware of your spending habits, then you can start setting up safeguards to stay on track. Take automatic withdrawals, for instance. When done correctly, you can have your bank electronically transfer a set portion of your paycheck (once it has been deposited into your account) into a savings account every month, without you having to lift a finger. This ensures the growth of your savings account while curbing your spending at the same time. Along similar lines, you may have to decide whether or not you have the discipline to avoid charging luxuries to your credit card. If not, it may be necessary to give the card to someone else for safekeeping—or even destroy the card and close the account. Remember, there is no shame in asking for support and accountability, only relief and empowerment by taking control of your money.
Taking The First Step
Getting your financial house in order is a process that includes clarity, honesty, communication, planning, and strategizing. While it may sound like a lot of work, all of your efforts will be well worth it in the long run.
We’d love to have a chance to talk to you about this process. Please contact us at Boston Metro Advisor for a complimentary consultation by calling (781) 995-0253 or email me directly at [email protected] today!
Paul McNulty is the founder of Boston Metro Advisor with over 20 years of experience helping people navigate the ups and downs of the economy toward the financial future they envision. His education consists of a Bachelor of Science in business administration from the University of Rhode Island and the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation.
Paul’s experience and education have made him a multi-faceted professional capable of assisting people with virtually all their financial needs. His services include every facet of retirement planning, from 401(k) rollover services and income planning to wealth management and estate planning. Paul has been active in his community over the years as a youth sports coach. When he’s not spending time with his wife, Cindy, and their two children, who are both recent college graduates, Paul enjoys reading, playing golf, and fishing. Learn more about Paul by connecting with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.