Financial planning does not work the way most people think. At least not in the beginning. Financial planning is not about making you wealthy or even secure. It is about getting the most of what you want by using the least of the resources you have today. Wealth and security may result.
Ideally lifestyle now and in the future will be unaffected by the planning.
Step one is just arithmetic. Find the lifestyle today that allows you to save enough and pay off enough debt so that there will be enough money to live in the way you are accustomed to doing, forever.
That means two things are important.
Many if not most people come to a financial adviser without a clear idea of these two concepts. Eventually they find that life would have been easier or worked out better had they known.
Financial planning is about compromise. You cannot save and invest the money you spend. A year gone by is gone forever. You cannot have high yield and risk free at the same time, unless you are bringing special skills to the table.
Financial planning is about understanding straightforward concepts.
Do your advisers and especially do yourself a big favour. Understand the process. Understand resources and time. Understand insurance, understand debt and understand a little about how investments work. Do all that and you will tend to be successful and you will tend to have less fear because you will see how it fits together.
Last. Start soon. Time matters as much as money and more than yield.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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