In the 10 years I’ve spent running a financial planning firm, I’ve learned a lot about how people handle (or don’t handle) their finances. And it doesn’t matter how much money someone has coming in; it can still be challenging to manage money and investments well.
Here are the top ten money lessons that I have learned after working with more than 150 clients over the past decade:
Money lesson #1: You have more power than you think. When I meet with a new client, sometimes they think their goals are unreachable, or they feel stuck in a rut and can’t see a way out. The truth is, you often have more power over your situation than you might think. With patience and consistency, you can impact your future financial well-being for the better.
Money lesson #2: Small changes add up to big results. You don’t always need to blow up your plans and your systems and start from the ground up. The most impactful changes are often the small, quiet ones that you’re not paying much attention to. But I have personally seen small adjustments (like automating a savings goal or allocating a bit more towards retirement) compound into major changes. This is why everyone needs a budget, because no matter how much money you have coming in, you should still have a plan for it.
Money lesson #3:Prioritize retirement savings. There are so many competing money goals that can pull your attention away from saving for retirement. Paying off student loans, saving for your child’s education or paying off your mortgage are goals that many people have, but don’t forget to support yourself, too. Taking care of yourself and making sure you have what you need helps you – but it also helps the people who love you, too.
Money lesson #4: Stick with a long term investment strategy. We’ve seen time and time again that timing the markets for quick returns does not pay off as well as long-term investing does. That’s why we typically prefer passive investing, with a balance of low portfolio expenses, minimal trading costs and tax efficiency.
Money lesson #5: Be open to change. While it helps to have a long-term plan that you’re working toward, know that ups and downs are inevitable. Sometimes you might hit a rough patch that delays you a bit, but that’s okay – just make it a priority to get back on track when you can.
Money lesson #6: Be careful where you get your investment information from. The internet is drowning in financial advice, both good and bad. The reason it can get so confusing is because what works great for one person could really derail someone else’s goals. Financial advice from the internet, podcasts, books or even your family members has to be taken with a grain of salt, because those sources don’t know your full financial picture.
Money lesson #7: Find the financial planner who is right for you. If you do want to work with a professional to set up a custom financial plan, know that not every advisor will be right for you – but there will be someone who is. I talk to potential clients all the time who I end up sending to a friend in the industry because they’d be a great fit. If you’re in the market for a financial advisor, look for a variety of planners to interview before you hire anyone.
Money lesson #8: Estate planning is important, and nobody really wants to do it. The words “estate planning” excite virtually no one, but it’s one of the best things you can do for yourself and your family. I have a couple blog posts on working through estate planning roadblocks and estate planning for physicians, (and some others here,) but this is another area where you can enlist the help of a professional to check this very important task off your financial to-do list.
Money lesson #9:Plan for rainy days – Things like emergency funds and insurance policies might not be the most fun way to spend your money, but they are incredibly important. Sometimes all it takes is one injury or illness to put a serious financial strain on you or your family. That’s why it’s vital to have a healthy emergency fund, plus disability and life insurance policies to protect you when you need it.
Money lesson #10: Don’t keep up with the Joneses. Keeping up with anyone else’s lifestyle is a losing game because you don’t have the full truth about their finances. Keep your eye on your own goals, and the things you want most. That will bring you much more fulfillment in the long run. (Lifestyle inflation)
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. For more information on the services offered, contact Katie today.
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