"Know Thyself and Thy Situation" is a financial planning rule that applies to accounting for financial events that you absolutely know are going to happen and events that have a probability of happening. We're talking about both expenses that can and should be predicted and about unpredictable emergencies and catastrophes. Especially, you must insure for your likelihood of long term care, for which there is a 50/50 chance, but only if you plan to live past age 65.
For example, for younger folks, if you have more than just one child, the odds are good that at least one of them is going to need braces; both of ours did at $5,000 a pop. If you don't have a full dental plan, then you need to put money aside which, in some years, might force you to make tough choices about how to allocate your monthly or annual savings allotment. With the increasing chance you will need long term care at some point, be aware that long term care is expensive, believe me, and this planning must be started early.
The problem is that if you don't set aside money for things we know are going to happen, we are forced to either borrow (via credit cards or credit lines), or try to finance them out of cash flow or cash in our precious investments. And if the latter happens, dollars to doughnuts your investments will be worth less than when you bought them at the very time you must, must, must sell.
The same goes for things which only "may" happen, and with these events we all-too-often procrastinate or tell ourselves "It won't happen to me" stories. Phooey...
You'd be surprised how many people are invested 100% in equities and mutual funds, with no cash, no excess cash flow. This virtually guarantees that they will have to sell assets at some point, which can be a disastrous when you consider that a bad stock market can often last for 6 or 7 years.
When you're making a savings, investment and asset protection plan, try looking ahead at least five years, asking yourself what you know you're going to have to spend during that period, and whether you have the excess cash flow to manage those expenses.
But there's more - What about insurance coverage for those emergencies and catastrophes that can happen to the best of us.
Other important aspects of Know Thyself are your work and life habits. Are you a procrastinator? Are you disorganized? Do you have a short attention span? Do you have high stress periods where you can't concentrate on anything but your work? Do you go comatose when things go badly with investments?
If you answered yes to one or more of those questions, you shouldn't be managing your own portfolio. But if you are managing your own portfolio, it should be a super simple portfolio that allows you to invest and rebalance without too much brain work.
At the end of the day, knowing yourself keeps you from making financial plans that, because of your character or situation, are likely to fail.
Most importantly, cover yourself against the unexpected loss which could ruin everything, the likelihood of catastrophic long term care expense. It's not fun to think about, but it's essential planning that cannot be put off until tomorrow.
Begin today, please, for your loved ones' sake.
You have put your energy to create a budget. It has been a time and energy consuming task, but you did it. Now, you must stick to it. That budget is not bad at all on paper, but it useless if we dont change our spending habits. Here are a few ways that even the biggest budget hater can stick to one. 1. Spend your budget wisely. Having plastic in our pocket stops us from thinking sometimes. We see something we want and we act like Betty and Wilma in The Flintstones: “Charge it!" Before we knowit, we have dipped into the bill money. Once it's gone, there's no way to put it back into our pocket until next month. 2. Keep your credit cards away. Once they are paid off, keep them away. If you carry them along you probably want to use them. It is okay to keep them since you never know when an emergency will come up, but out of sight will lead to out of mind. 3. Forget about that raise. We are all guilty of planning on our next purchase as soon as we're running out of money. Instead of using that money, put it away in a savings account. It is an added bonus for doing a good job at work. Let it grow a little away from greedy fingers. 4. Put away that tax refund. Each year I used to count on the tax refund to get myself out of debt once again. The problem was that I got right back into debt and needed to be bailed out again. Treat tax money like a raise or a bonus - keep it unconsidered. 5. Withdraw money from the ATM at a scheduled time only. If you know that you will need some cash on hand, go to the bank once and get enough to last. When it is gone, it's gone. Don't follow the urge to go back again for more. 6. Learn how to grocery shop. This seems like insignificant task but it really is something fun to getting enough food to last, especially with children. Cut coupons out of the Sunday paper. Stock up on essentials like toilet paper, laundry detergent, soap, and the like when there is a sale. Buy common food staples in bulk. Buy meat from the butcher and have it cut up for free. 7. Re-negotiate insurance rates and utility plans. Every three years or so it is good to see which plan gets you lower rates - your current insurance carriers or another. Sticking to a personal budget takes time and we all fall back into old habits now and again. The point is to get right back on the saddle and keep on going. You will reach your debt-free future.
Both Clay Cotton & Akira Kiyosaki are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Clay Cotton has sinced written about articles on various topics from Insurance, Parental Care and Health. Long term care insurance activist, CB Cotton, writes for - The Online Baby Boomers Decision. Clay Cotton's top article generates over 6600 views. to your Favourites.
Akira Kiyosaki has sinced written about articles on various topics from Finances. For more information, get yourself a personal financial education at . Akira Kiyosaki's top article generates over 880 views. to your Favourites.