Cash flow is king

The area of your finances that you’re neglecting the most is your cash flow.

You’re in the “accumulation” period of building wealth and your cash flow is the engine fueling this growth.

Consequently, it’s imperative to understand your monthly expenses and savings rate.

This will make or break your wealth accumulation and, if done properly, will give you more options in your career and life.

Investment returns are more of a vanity metric at this point.

Bottom line – what gets measured gets managed!

Stocks are for the long-run

Do you view owning stocks as a long-term endeavor?

If so, following their changes constantly and making investment decisions based on those changes is a very, very bad idea.

It’s the worst possible thing you can do because people are so sensitive to short-term losses.

If you count your money every day, you’ll be miserable.

Bottom line – cash is short-term and stocks are long-term.

The truth about renting

Never feel guilty about renting.
 
People are so focused on monthly payments that they completely ignore the “phantom” costs of ownership.
 
Here’s a great example I heard recently: “my car payment is $350/month”
 
That’s only half the story…
 
When you factor in gas, parking, insurance, etc. it costs almost $1,000/month.
 
Homeownership is no different.
 
Yes, buying a house can make financial sense but sometimes the wiser move is to rent in order to prioritize other more pressing financial initiatives.
 
Everyone’s situation is different and you should run the numbers because they don’t lie!

How to avoid being “house poor”

Here’s how to avoid being “house poor”:

– eliminate all high interest debt before buying

– establish emergency fund before buying

– monthly payment = 25% (or less) of take-home pay

Abide by these rules and you will own your home instead of it owning you!

Financial underperformance is a symptom

Most people focus only on one risk: losing money in the market.
 
They neglect or completely ignore other risks suffered by not having money invested and working on their behalf:
 
– failing to keep up with inflation 
 
– being financially dependent
 
– being stuck in a job you hate
 
– outliving your savings
 
The list goes on…
 
Most people think their financial underperformance is the problem.

The truth is it’s a symptom of the real problem – your behavior.

Focus on Your Goals

Stop getting in your own way.

When markets are good: investors become unsatisfied with their returns so they “reach” for extra return by taking more risk.

When markets are bad: investors panic and “reach” for extra safety by selling their investments.

These decisions tend to happen AFTER the market has already risen or fallen.

Bottom line – if you have a proper investment allocation then adjustments should occur not when the market changes, but when your goals change. 

Bears go broke

Are you routinely optimistic or pessimistic about investing in the stock market?

Those who fall into the latter category will find it much more cumbersome to accumulate wealth.

Successful investors do not amass their wealth with a persistently negative outlook.

As J.P. Morgan once said, “The man who is a bear on the future of the United States will always go broke.”

Less can be more

More isn’t always the answer – it’s more likely the problem.

Everyone thinks the answer to happiness is “more.”

Everyone is working for a payoff that will come later instead of living right now, and they are making payments on a whole lot of stuff, that is essentially an illusion, to help make them feel happier about the lousy deal they have agreed to.

What they agreed to was that it was stuff, and not freedom, that would make them happy.

You will never be happy if you believe you can buy it. You will always need more. This un-winnable situation, constantly buying more and more short-term happiness while costing yourself more and more time, is an infinite loop of misery.

Be intentional with your resources and remember less can be more!

Listen Then Speak

Not all financial advisors are created equal.

A “true” financial advisor starts by listening, questioning, assessing and then planning. Progress is made.

All the others start with their plans, then assess, question and finally listen. By this point everyone has a bitter taste in their mouth.

Bottom line – be wary of any advice given before you’ve truly been heard. Otherwise, someone else’s agenda is being prioritized.

Who can I help the most

I decided to specialize, not generalize.

It’s so tempting to appeal to the herd, but that isn’t my inspiring vision of success.

My vision is to be the go-to financial advisor for attorneys. To be an indispensable partner in the lives of my clients.

Change your motivation from “Who can pay me” to “Who can I help the most” and see what happens.

Terry Andersen, CFP®

terry-andersen-sidebar-image
I’m a CERTIFIED FINANCIAL PLANNER™ who counsels Associate Attorneys nationwide about how to both pay off their student loans in the most cost-effective manner and build wealth faster than their peers.

Tactical Wealth