Re-discovering the Fundamentals of Financial Planning

To lose weight in the 80’s, we went on low-calorie diets. In the 90’s, we switched to low-fat diets, and now, in the 21st Century, we are completely convinced that it’s all about the low-carb diet. What ever happened to just eating healthy?

In a civilization where everyone is looking for shortcuts, it’s not often that you see something about fundamentals. Well, take short letter of the following three rudiments of financial planning, because it may just be what’s been missing from your ‘plate.’

1) Rich Person a end in mind! Savings are only as utile as your desire to apply them to a specific purpose. If your end is a new home, great; if it’s to direct the children to Fordham, even better; and if it’s retirement, terrific. Once you have got the “why,” you must determine “how much,” and “when.” These two variables will determine how aggressive you must be, as well as how much of a present forfeit you’ll need to do in order to attain your goal.

2) Spend less than you earn! If you’re A spot late in the game with this one, then the first order of business is to minimise your debt. The common American doctrine is to pass first, and salvage what’s left. Contrast this with the Eastern inclination to put first, and pass what’s left. Can you think which attack is more than likely to lead to wealth? Many people will acknowledge that it is unreasonable to purchase a 50” plasma telecasting if the lone manner to pay for it is with a monthly installment plan. Why then don’t we apply the same doctrine to purchasing a home? When considering rent versus a mortgage, it is generally advantageous to have got the mortgage. However, replacing the five-bedroom home with a nine-bedroom home before the five-bedroom have been paid off simply doesn’t fit to the model.

3) Invest monthly, and start now! $1,000 invested monthly is a heck of a batch easier than $12,000 at year’s end. Add to that the conception of dollar-cost averaging and more than than often than not, you’ll also earn more over time. Finally, because of compounding, the sooner you get started, even at a small amount, the less clip it will take to get wherever it is you desire to go—even if that includes a halt along the manner for a low-carb tofurkey salad.

© 2004 Matthew S. Clement, All rights reserved.