Thoughts on Lifespan Financial PlanningThoughts on Lifespan Financial Planning

Peter Raeth, Ph.D.http://InformationAnthology.net/CareerMentor

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What we will talk aboutWhat we will talk about

Getting startedGetting started Avoid debtAvoid debt Managing lifeManaging life Financial foundationsFinancial foundations Future planningFuture planning

A layman’s advice from experienceA layman’s advice from experience I am not a financial advisor, just a common laymanI am not a financial advisor, just a common layman Seek advice from a trusted fee-based certified financial advisorSeek advice from a trusted fee-based certified financial advisor Want to share thoughts from personal experienceWant to share thoughts from personal experience Will offer ideas most do not consider until too lateWill offer ideas most do not consider until too late Hope to help others grow financially from their lifetime of workHope to help others grow financially from their lifetime of work

New GraduatesNew Graduates You graduate and find a jobYou graduate and find a job What do you do with that first pay check?What do you do with that first pay check? Likely more money than you have ever seen at a single timeLikely more money than you have ever seen at a single time Represents opportunity, not invitation to spendingRepresents opportunity, not invitation to spending

need to live below your incomeneed to live below your income not necessary to chase fads or follow the crowdnot necessary to chase fads or follow the crowd newspaper shows where the crowd has ended up regarding debtnewspaper shows where the crowd has ended up regarding debt

Many people graduate and promptly go into such debt that Many people graduate and promptly go into such debt that they will be years paying for things that depreciate much they will be years paying for things that depreciate much faster than the debt can be repaidfaster than the debt can be repaid

Big difference between needs and wantsBig difference between needs and wants not at all the same thingsnot at all the same things don’t kid yourself into turning wants into “needs”don’t kid yourself into turning wants into “needs”

Be excessive in satisfying wants and you will always be poorBe excessive in satisfying wants and you will always be poor

Be Master of Debt – Not Mastered by DebtBe Master of Debt – Not Mastered by Debt Don’t be suckered into the slavery of debtDon’t be suckered into the slavery of debt You can’t easily wash your hands of debtYou can’t easily wash your hands of debt

very hard to get out of debt caused by excessive “want” satisfactionvery hard to get out of debt caused by excessive “want” satisfaction Instead of spending, save and investInstead of spending, save and invest Establish your financial foundationEstablish your financial foundation

thereby your financial freedomthereby your financial freedom You are NOT free to choose if you are enslaved by debtYou are NOT free to choose if you are enslaved by debt

since your first focus has to be earning money now to pay past debtssince your first focus has to be earning money now to pay past debts You can’t make the choice, for instance, to start a new careerYou can’t make the choice, for instance, to start a new career Slaves to debt have to focus on near-term incomeSlaves to debt have to focus on near-term income It becomes a vicious cycleIt becomes a vicious cycle

Manage professional life like a businessManage professional life like a business

Basic ActivitiesBasic Activities plan for futureplan for future execute planexecute plan revise plan as neededrevise plan as needed perform due diligenceperform due diligence provide to marketprovide to market maintain what you providemaintain what you provide improve what you provideimprove what you provide manage incomemanage income manage expendituresmanage expenditures make profitmake profit invest profit wiselyinvest profit wisely

Watch cash flow– if you want to leave a job,be sure you have a way toreplace that income first

– ensure income exceeds outgo

– prepare for future financial events

Basic Financial FoundationBasic Financial Foundation InsuranceInsurance

• HealthHealth– extremely expensive to cover on your ownextremely expensive to cover on your own– for instance: one car accident can wipe you out financiallyfor instance: one car accident can wipe you out financially

• LifeLife– to protect your family and your estateto protect your family and your estate

• DisabilityDisability– it happensit happens– I myself have been on medium-term disability due to eye surgeryI myself have been on medium-term disability due to eye surgery

• AutoAuto– covers your health and the other party’scovers your health and the other party’s– also covers damage to material thingsalso covers damage to material things

• PossessionsPossessions– no need to lose everything because of an accidentno need to lose everything because of an accident

• HomeHome- a major purchase needs to be protecteda major purchase needs to be protected

Basic Financial Foundation (more)Basic Financial Foundation (more)

Savings (liquid)Savings (liquid) 4 to 6 months operating capital without working4 to 6 months operating capital without working don’t let layoff put you into foreclosure or bankruptcydon’t let layoff put you into foreclosure or bankruptcy

Investments (less liquid)Investments (less liquid) balanced for your point in lifebalanced for your point in life a good fee-based financial advisor can guide you in thisa good fee-based financial advisor can guide you in this don’t just “play the lottery”don’t just “play the lottery” don’t respond to pump-and-dump emailsdon’t respond to pump-and-dump emails if nothing else, read Value Lineif nothing else, read Value Line

aid to due diligenceaid to due diligence available at most librariesavailable at most libraries highly regarded investment newsletterhighly regarded investment newsletter

Future PlanningFuture Planning

What outcome do you want to achieve in life?What outcome do you want to achieve in life? Educate yourself so you can make good choicesEducate yourself so you can make good choices Where are you now financially?Where are you now financially? Where do you want to be, when, doing what, having what?Where do you want to be, when, doing what, having what? Work with a trusted fee-based financial advisorWork with a trusted fee-based financial advisor Develop a solid planDevelop a solid plan Review that plan annually – Keep that plan up to dateReview that plan annually – Keep that plan up to date Be sure to address negative possibilitiesBe sure to address negative possibilities Plan too for life’s big eventsPlan too for life’s big events Implement the plan – Don’t let “gotta have” get in the wayImplement the plan – Don’t let “gotta have” get in the way Adjust plan over time according to results, conditions, eventsAdjust plan over time according to results, conditions, events

Let Time Work for YouLet Time Work for You

Plan Necessary Debt vs. IncomePlan Necessary Debt vs. Income

Want major debt paid by age 55Want major debt paid by age 55 Want minor debts paid at end of each monthWant minor debts paid at end of each month Develop self-sustaining incomeDevelop self-sustaining income

independent of work hoursindependent of work hours wise investments necessarywise investments necessary consult trusted fee-based financial advisorconsult trusted fee-based financial advisor

pick this person carefullypick this person carefully due diligence absolutely necessarydue diligence absolutely necessary you can’t just make a selection blindlyyou can’t just make a selection blindly

Self-sustaining income gives you freedom to chooseSelf-sustaining income gives you freedom to choose

SummarySummary Recognize the vast difference between needs and wants lest you become a Recognize the vast difference between needs and wants lest you become a

slave to debt. Be excessive in satisfying your wants and you will always be slave to debt. Be excessive in satisfying your wants and you will always be poor, perpetually unable to do the things you really enjoy. Your financial poor, perpetually unable to do the things you really enjoy. Your financial foundation must be firm and free of debt.foundation must be firm and free of debt.

Seek advice from a trusted fee-based certified financial advisor. Do your Seek advice from a trusted fee-based certified financial advisor. Do your due-diligence before selecting such an advisor.due-diligence before selecting such an advisor.

Use insurance wisely to cover unexpected events. Important categories of Use insurance wisely to cover unexpected events. Important categories of insurance are: health, life, disability, auto, possessions, home.insurance are: health, life, disability, auto, possessions, home.

Have all major debts paid by age 55. Pay minor debts monthly. Use credit Have all major debts paid by age 55. Pay minor debts monthly. Use credit cards only for convenience. Do not carry credit-card debt.cards only for convenience. Do not carry credit-card debt.

Time is your friend. Let it work for you. Put a plan in place, follow your Time is your friend. Let it work for you. Put a plan in place, follow your plan, and review your plan annually. The earlier you begin the better. To plan, and review your plan annually. The earlier you begin the better. To earn self-sustaining financial stability, establish a productive career based earn self-sustaining financial stability, establish a productive career based on a strong study/learn/work/produce ethic early in life.on a strong study/learn/work/produce ethic early in life.