My wife and I share an office and a home. The arrangement may not be great for everyone, but it’s worked out splendidly for me. Trying to avoid a trip to the Small Mart, she scoured the office for a replacement printer cartridge. While her efforts were in vain, she cleaned out a drawer and found a list of Personal Finance Dos and & Don’ts (Business Week, Dec. 18, 2008) that aged well.
TRACK YOUR SPENDING: It was a pleasant reminder to see me being quoted. "It’s a universal mistake. Most people don’t know where their money goes." Back then, a desktop version of Quicken was the best option. Now you can track spending on your phone, but that’s not an improvement. My experience is things get missed unless you are a numbers nerd. If you don’t know what you’re spending goals are, you cannot plan for retirement; goals provide direction.
DON’T TRY TO PREDICT THE FUTURE: In December of 2008, it looked like the financial world was about to collapse. Some argue stocks are primed for a fall, so it may be tempting to sell now and buy back later when they are cheaper. Except no one knows the opportune time.
INVEST INTERNATIONALLY: Having 20 percent of your overall stock allocation invested overseas makes sense. Diversification may not be a free lunch, but it’s close.
DON’T TAKE INAPPROPRIATE RISK: With low rates for fixed income, it may appear stocks are the only option; that’s a big mistake. Risk tolerance and risk capacity are not synonymous; don’t confuse them.
DON’T STOP CONTRIBUTING TO RETIREMENT ACCOUNTS: In 2008, it may have been tempting to stop funding your retirement account. Now it may seem risky but for a different reason. In both cases, a company match cushions any downside.
PAY OFF EXPENSIVE DEBT: Paying off a car loan with a 6% interest rate provides an immediate 6% return. Some advisors, particularly those who charge fees based on assets managed, may discourage paying off debt, pointing to recent market returns. However, that argument ignores the fact stocks were negative in 2018. Also, the S&P 500 was negative for an entire decade, 2000-2009.
DON’T INVEST IN ANYTHING YOU DON’T UNDERSTAND: Complex investments have high fees, a hurdle often challenging to clear. Life insurance is not an investment either. In almost all situations, term insurance is the best choice except for the insurance agent. Many annuities have mind-boggling complexity. For instance, variable annuities have an accumulation value and an actual cash value, but one is akin to Monopoly money and one isn’t. Don’t confuse them.
LIVE BELOW YOUR MEANS: If you have a problem with credit card debt, spend only cash. The only way to save is to have money left over at the end of the month.
Useful financial advice does not get stale.
You can’t always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.