As my children grow older, I want to provide them with a firm financial foundation. I have been blessed to be able to absorb many important lessons through books I have read, clients that I have been able to observe, and having very frugal parents. I would like to share a few of the basic lessons that I plan to share with my family and think would benefit those that you love and are able to influence. Creating and maintaining wealth starts with these very basic ideas.
- Never spend more than you make. This rule sounds like common sense, but it is amazing how many folks do not know this. We live in a consumption driven society that stresses the here and now. No matter your income, always save some of it for yourself and for that rainy day that will show up when you least expect it.
- Your choice of a house will make the largest financial impact on your net worth. We have had clients who want to help their kids get a “head start” by helping them purchase a house. While the help is nice, it is dangerous. Because we all want nice things, the tendency is always for a larger and nicer home, especially when help is provided. Peer pressure is not just a high school issue, it is real when it comes to having to furnish these larger homes with the most current styles and offerings. It is also real when the neighbor is driving the current year model imported luxury vehicle. All of us want to fit in and belong, and in my 25 years of watching the financial game, I cannot stress enough the dangers of being like the Joneses. True worth cannot be measured by the cars we drive, the clothes we wear, or the vacations we take. The choice of where you live will impact your net worth and your self-worth.
- Don’t try to time the markets. It can’t (and shouldn’t) be done. The secret to owning stocks is not to get scared out of them. You cannot predict what the markets will do today, next week, or next year. However, you can plan month in and month out, year in and year out to have patience and discipline to invest small amounts over a lifetime. My job as a financial advisor is to invest and allocate client’s portfolios-and, more importantly, to help clients to be better long-term investors by avoiding emotional traps and common behavioral pitfalls (such as market timing).
I hope to use this spot in our newsletter to share common sense money management strategies that you can use and share with those you care about. I cannot tell you how many people over the years have expressed their regrets in not following these three items.