I want to start off this week’s Common Cents by saying thank you. Several of you have reached out to me letting me know that you’ve enjoyed this column since I began penning it in January. One reader told me that he texts specific columns to his teenage grandkids. I received an email from someone studying to become a licensed financial advisor who appreciated the recent focus on giving and stewardship because she also shares those values. A fellow Lions Club member communicated that he looks forward to each column and that he always takes away something of value. This is certainly not to brag, but it’s nice to find out that someone other than your wife is reading your material. Haha. Now on to this week’s column.
I recently watched a podcast by someone who proclaims to be an “anti-financial advisor.” He feels that most people can handle their financial affairs well without the paid guidance of a licensed professional. The topic of that particular podcast was secrets financial advisors won’t tell you for free. Some of it was actually good information, while other tidbits of advice were completely off track and devaluing to the work reputable financial advisors do.
After watching the clip, I decided to make my own list – and the only cost to you is the time it takes to read it. So here are “The Top 5 Things This Financial Advisor Wants You to Know…Free of Charge.”
1. You probably don’t need to invest more – you need to spend less.
It’s easy to believe that the solution to building wealth is finding a better investment. But if you consistently spend everything you make, even the best investment strategy will have a difficult time getting you where you want to go.
The most powerful financial plan often begins with something simple: Live below your means. That doesn’t mean you can’t enjoy your money. It means you should intentionally decide where your money goes instead of wondering where it went. A person who consistently saves and invests 10% of their income may be in a much better financial position than someone who earns significantly more but spends every dollar.
2. Your biggest financial risk may not be the stock market.
When people talk about financial risk, they often think about a market correction or crash. But for many families, the greater risks are things such as inadequate insurance, excessive debt, lack of an emergency fund, or not having a plan if something happens to the primary income earner.
Imagine having a million dollars invested but no disability insurance, inadequate life insurance, and six months of expenses sitting on a high-interest credit card. Your investment portfolio isn’t necessarily your biggest financial concern.
Good financial planning is about protecting what you have – not just trying to make more.
3. You don’t have to have a lot of money to benefit from financial planning.
There is a misconception that financial advisors are only for wealthy people. That’s simply not true.
Financial planning can be valuable at almost every stage of life. A young person may need help establishing good savings habits. A family may need to coordinate retirement accounts, insurance, college savings, and debt. Someone approaching retirement may need to determine how much they can safely spend to make their money last their lifetime. Note: Only the Good Lord knows how long that will be.
You don’t have to be a millionaire to need a financial plan. In many cases, having a plan is one of the things that helps you become financially secure.
4. The best investment is often the one you can stick with.
Investors frequently ask me, “What should I buy right now?” Sometimes a better question is, “What can I own without panicking when the market drops?”
Markets will rise and fall. If your investment strategy causes you to lose sleep or want to sell everything during a downturn, it may not be the right strategy for you – regardless of how good it looked on paper.
Successful investing isn’t necessarily about finding the hottest investment. It’s about having an appropriate strategy, diversifying, keeping costs and taxes in mind, and having the discipline to stay invested through varying market environments.
5. Your money is a tool, not the ultimate goal.
This may be the most important piece of advice I can give, and it’s directly correlated to my most recent column about building wealth with a purpose.
Money matters. Saving matters. Investing matters. Preparing for retirement matters. But money is ultimately a tool that allows us to accomplish something more important.
For some people, that’s providing for their family. For others, it’s giving generously, serving their community, traveling, starting a business or leaving something meaningful for the next generation.
Building wealth without knowing why you’re building it can leave you with a large number on a statement but no clear idea what that money is supposed to accomplish. Make a plan that focuses on the bigger picture.
Tracy L. Campbell is a partner and financial advisor at Meriwether Wealth and Planning, an independent Registered Investment Adviser (RIA) firm headquartered in downtown Minden, La. E-mail Tracy at tracy@meriwether.com. Disclaimer: This content is for general knowledge and education, not a substitute for professional advice.