Financial Solutions

Practices

Would it be fair to say that most people have a budget? (How would you know, right?!) Do you?

Do you know how much money comes to you during each time period? Do you know how much money remains at the end of that time period?

If you answered both questions "Yes," then you have a budget. Whether you have it itemized or even written down is not the point. If you have a sense of the numbers that go with those questions then you have the makings of a budget. The arithmetic difference between how much money there is at the start of the period plus what comes in during the period minus how much is left at the end of the period is the amount you used. For most people, the most important number in a budget is how much is needed for each regular period of time, because the other numbers depend upon that.

The hard part of making a budget is remembering everything for which you need to account.

Next is putting all those things into the correct categories of income or expenses, on the same time basis (e.g., being sure all items are for a month, or semi-monthly, or biweekly, etc. Or knowing how many weeks are really in a month...is it 4 or is it closer to 4.345?).

You may have heard that knowledge is power. That could mean that simply knowing how your money flows is a powerful practice in the journey of creating the kind of financial security you would find truly satisfying.

If you would like help with budgeting your money, including sample forms, you can get started here:

Financial Resources

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• Practices
• Protection
• Planning

Protection

Human nature seems to lead us to react rather than to "pre-act." Consequently, we gird ourselves with protection only after something scary has happened. We respond to problems but don't work as hard to prevent them. And we always think we have more time. We seem better equipped to address what we see - now - than to robustly plan for what is not visible, like the future.

Even when the topic of "financial protection" comes up, many people first think of clamping down on money rather than putting it to work.

Financial protection could be viewed in terms of basic life needs, such as whether we have enough regular cash flow to provide shelter, food, and clothing--along with transportation and safety--and meeting the needs of those we love.

Financial protection is also considering and planning for the changes of circumstances and fortunes when we stop doing what we now do to generate cash flow. Financial protection is saving now for living later. It is using "other people's money" to guard and guarantee our own money. It can be thought of as a kind of insurance on the money itself, as well as on ourselves. Financial protection sometimes gets a bad name because of mistrust. We sometimes imagine someone trying to sell us something to "help" but we don't believe in the help--because we don't believe in the person offering it, or we haven't trusted others we perceive to be like them.

But the need for financial protection is real, regardless of the trust factor. Education is the key. Then we can know enough to make decisions where we can trust ourselves that the expected results are believable and true.

Our approach at Life Financial Solutions is to help make sure you can help yourself. We help you to help yourself. Start here with some basic questions and information and begin to take the mystery out of the math of the effect of time on your money.

Planning

Whether we are skilled at planning or we struggle with it some, like planning our time, our travel, or how we're going to get something done, we often simply live with the consequences or maybe the consequences are momentary, insignificant, or low-impact overall. However, financial planning can be difficult.

It would seem that we should simply estimate the amount of money we have now, or how much we can save, then estimate the number of years we'll need it for, and simply divide the money by the time. Right. Do you know what is severely lacking and even fairly deceptive about this method?

ONE MILLION DOLLARS

There are a number of problems with planning in this manner. Do you believe that one million dollars is a lot of money? If you answered quickly, you may have said yes, or "it depends." If you thought longer about it, you probably considered other factors than how great it would be to have a million dollars, what we've grown accustomed to calling a millionaire.

You may have considered how the cost of living goes up over time. Or maybe you did some quick math and said, "Ya know, if I live twenty years in retirement and divide one million by twenty, I get $50,000 a year." Then you may have said to yourself, "Well...hmmm...how does that compare with what I make now, and how much it costs me now to live comfortably?" You may even have factored both the cost of living and standard of living together and realized that ... (are you sitting down?) ... If you live twenty years in retirement, on a fixed income, the costs of your lifestyle twenty years from now will likely be as different as between now and twenty years ago! Can you remember what that difference really looks like?

THE ECONOMY

It seems that we all love it when the economy is doing great, right? But we should realize a simple way of thinking about the economy is that goods and services are bought and sold either at a gusto, in a lackluster way, or somewhere in between. And when people are eager to buy, they're usually willing to pay the going price. The more people are willing to pay, the more things cost. And the more people want things ("demand"), the more the supply to meet that demand must rise and, along with that, the price. In other words, the cost of a great economy is that things must cost more over time. Otherwise there is only flat growth. And if the economy doesn't grow, then interest paid on savings and investments stays low. Consequently, we end up paying more in interest to borrow (think about loans and homes and cars--"Oh, my!) than the amount of interest we are earning on much of our savings and investments.

THE COST OF NOT PLANNING WELL

The fear of running out of money is the number one concern of between half and two-thirds of retirees and pre-retirees, it is estimated. Why would this be? Well, people are living longer. The money they've saved is dwindling as they use it. The costs of living are rising with each passing year. Managing declining health and long-term chronic illnesses can be a major drain on savings. Earnings and interest rates are either not keeping up with the rate of inflation--OR--earnings and interest are paid on an ever-decreasing savings balance. Or both.

Just try to imagine what "running out of money" looks like as you become older and less able to work to make up the difference. (Cue the "waa-waa" music.) 

When planning is done well, all of these and other factors are accounted for. Planning done well can even result in your income increasing as you grow older through the retirement years. Imagine that!

We have placed financial calculators on this site for you to use if you're inclined or want to play with a few numbers. Or, better yet, you are invited to start your planning journey--or fix--or update--what you may have already done by creating your own financial plan, right here and now! This link appears in other places on the web site. We keep prompting you to do this because 

it is how we can best begin to help you (and please, feel free to use the contact methods below or on the Contact page if you want help along the way). The planning tool securely requests your financial information then provides the analysis to you in descriptive written, graphical, and chart formats. We will then go over that with you and incorporate all these ideas described here.

But don't take our word for it --

go do it!

CREATE YOUR OWN FINANCIAL PLAN

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