Seven simple steps to prosperity
It appears that the economic news and the destructive political dialogue have gone from bad to worse. With summer upon us, perhaps it is time to take a deep breath and celebrate the abundance that surrounds us all.
Financial Abundance, LLC, was founded to help individuals and families learn to approach their financial lives from a sense of abundance instead of from a fear of scarcity. To maintain a sense of abundance, the following are some approaches that may be helpful in increasing your financial prosperity:
1) Pay yourself first. The first step toward financial abundance is to spend less than you earn. The easiest way to accomplish this is to “pay yourself first.” Before spending your earnings on anything else, “pay” a portion of your income into a retirement or savings account. This savings provides a cushion to protect you in case of a financial emergency and will ultimately help provide for a financially abundant retirement.
2) Buy what you need and delay what you want. It is often hard to differentiate our needs from our desires. If you are considering purchasing something that you want but may not necessarily need, delay the purchase for a week to see if the urge to buy passes. Many things that I thought I required often become unimportant soon thereafter.
3) Invest for after tax returns. Investments that may appear to have excellent returns often leave you with a high tax bill and a lower than anticipated after tax return. If you are considering an investment using taxable funds (as opposed to tax deferred funds), determine the after tax return of each investment. With our current tax structure, investments providing ordinary income will often require over twice the pre-tax returns to be comparable to investments taxed at long term capital gains rates.
4) Keep a well diversified investment portfolio. Investors often believe that if they have twenty mutual funds, they are well diversified. In many cases, this investor would have better returns and be more diversified with the Russell 3000 stock index ETF. Whether you manage your own portfolio or use an investment advisor, remember that portfolio diversification comes not from the number of funds owned but from the diversity in types of investments that each fund represents.
5) Begin Social Security payments when they will provide the most benefit. As baby boomers reach age 62, many retired boomers believe that they should immediately begin taking their Social Security payments. Most people who are in good health will receive more in lifetime Social Security benefits if they wait until at least their full retirement age (FRA) to begin taking their benefits. If you are not sure when to begin your benefits, consult a knowledgeable financial advisor to help you make this very important decision.
6) If in doubt about your retirement funds, work that extra year. When reviewing retirement plans, my clients are often stunned by the effect that working one extra year can have on funds available during retirement. Before calling it quits, be sure your retirement funds will be adequate to provide you with the retirement lifestyle that you desire.
7) Have at least $1 million in “Umbrella” liability insurance. Homeowner’s and auto liability insurance policies may not provide adequate protection if you are responsible for a serious accident or injury. A $1 million umbrella liability policy, costing approximately $200 per year, will help cover this gap. While this insurance will likely never be needed, if it ever is, this could be the best $200 you have ever spent.
The only guarantee that we have in life is that it will someday end. Between now and then, we can choose whether to live in a constant fear of financial scarcity or to live from a sense of financial abundance. My mission is to provide help in finding the path to a more prosperous financial future.
May you have a joyous and abundant summer!
Wayne Farlow is the founder of Financial Abundance, LLC, a Registered Investment Advisor, providing fee-only financial planning, asset management and retirement planning services. He is the author of “Financial Abundance Guide,” available free at www.finabguide.com . He can be reached by email at email@example.com or at 303-554-0309.