9 STEPS

TO FINANCIAL ORDER AND CONTROL

We live in a world of complexity and change. How should a person’s financial life be set up, to deal with all the decisions to be made? I find this simple path helps put everything in order and maintain a level of control.

1. Maximum Protection. All areas of personal protection and insurance should be established to meet your full personal needs. Once done, these allow you to take the risk and seize opportunities necessary for effective growth. The overall goal is to achieve maximum benefits at minimum cost.    

2. Save 15% of Income. Anything less and you could risk falling behind. Some should be saving as much as 25%.  There are ways to save effectively that will make this amount possible for you.

3. Accumulate Six Months of Income in Liquid Savings. This is money to be available at all times. Responsible investing can not begin until this is accomplished first. There are seven areas in which to save - you should choose those that are the most efficient for you.

4. Avoid the Compounding of Tax. Be aware: as you compound interest in taxable savings, you may also be compounding the taxes that come due with it. Investigate ways to use the interest in a more tax-favored manner.

5. Begin a Qualified Retirement Plan. (example: 401K). Since these plans are illiquid, start by contributing only up to the match or 7% of gross income. These plans should be monitored carefully to avoid tax inefficiencies upon withdrawal.

6. Amounts Over the Six Months of Savings (in #3) can move into growth and investments. With this solid foundation, you are now able to invest and avoid the possibility of making emotional mistakes.

 7. Invest Properly - with purpose and understanding. Consider how income, growth and tax benefits relate in the overall picture. A balance should be maintained for the potential of maximum performance.  

 8. Avoid More Compounding of Tax.  Any taxable interest, dividends, income, etc. from investment vehicles should be taken into account. Tax-favored uses can be examined here as well.  

9. Review and Analyze. As funds accumulate, consider more protection to match new growth; or add more savings or investment vehicles. Make financial decisions that are proper for your needs, current position and the world around you.

This progression will ensure that you are getting everything you should have – complete protection, efficient savings, effective growth, tax advantages, cost reduction, strategic options, and most importantly, full control at every level.