While in Wonderland, Alice meets the Red Queen and discovers that running just leaves you where you were.
“Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else—if you run very fast for a long time, as we’ve been doing.”
“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
Sound familiar? Financial life can easily become that way. Work hard. Work long. Seem to get nowhere.
Financial planning is an antidote to the condition. It helps you avoid unreasonable expectations.
In financial planning there is effort directed to balancing the essential parts of spending against income. Think time.
The purpose is solve the equation. Lifestyle + Debt repayment and interest + required saving + taxes and other fees = Earnings. The Red Queen’s Race. Just enough.
If you want to avoid staying where you are, you must run faster. More hours, more risk, better negotiation. Sometimes faster is not available. Then what?
Financial independence means being able to avoid the race entirely.
Financial independence begins very early. Value saving. The first decision is to avoid debt and minimize lifestyle. Save a large share of your income. In doing that the financial accumulation grows fast enough that earnings from it powers the growth. Your money grows without your being involved in any race.
Escalate lifestyle slowly, learn about investing and taxes. Incur no debt that cannot pay its own way. Reduced expenses or higher earnings result in the same end.
Financial planning usually deals with five layers.
Tomorrow we will talk about the first layer. Controlling time
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Contact: firstname.lastname@example.org 705-748-5181