Is a little planning better than none. Probably yes if you follow the right order. The key is to find process things and get them started. These are the ones that give you a reasonable answer even if the amounts are a guess and the product is whatever you understand.
- Insurance of all kinds.
Life, critical illness, disability income insurance and liability insurance protect the financial value of your career and your savings. They provide the capital to allow the plan to work. Casualty insurance like fire, flood, vandalism, and theft give you money to replace something you own that has been lost or destroyed. Insurance keeps you from needing to earn the same money more than once.
Saving is a habit. The amount could be calculated but saving the right amount is not as important as learning to save. Do not use the “I don’t know how much” excuse to permit saving nothing.
- Be very cautious with debt.
Debt is a call on future earnings. If you cannot see how the debt provides value equal to the future call on income, do not incur it. Think about a vacation. If each year, you put $5,000 on a credit card and pay it off at $500 a month, until the next vacation, you will always be in debt and at high rates. If you save $500 per month and then take the vacation, you will never be in debt. If you can’t afford the $500 saving now, why will it be affordable to owe a credit card company $500 a month, beginning next year?
Refinement is what comes after you handle the essentials of insurance, saving and debt avoidance. Efficiency.
- Cash flow management is the first key step. Not every month is the same. Usually with a sound budget.
- Insurance and investment plans are in many forms. Some match your particular situation better than others. Efficiency is a big deal over a long time. The rest of your life is a long time.
- Building a long term plan on your values, skills, hopes, needs, fears and aspirations helps achieve product efficiency and provides peace of mind. You know why you are doing what you do and you can see the progress.
- Having a plan and keeping track of it allows you to anticipate some of the evident problems and opportunities and to plan to accommodate them.
If you start with a simple plan, you should work towards refinements. There are risks to skipping that step.
- You tend to miss things. Mostly things you haven’t needed to know about yet.
- Some people double count. You can only use money once.
- Resource allocation and timing of the allocations can be sub-optimal. Pay debt or invest, or both?
- Haphazard plans tend to create more firefighting effort than the more complete plans.
Work at completing your plan. Consider the renowned American philosopher Joe Namath.
“If you aren’t going to go all the way,
why go at all.”
Plan to go all the way eventually, but start immediately with the insurance, saving and debt avoidance parts.
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.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772