Financial Security
While completing my coursework to become a Certified Financial Planner, I studied all of the ways that I can help clients build wealth.  These include many of the topics you typically hear financial advisors talking about such as investment portfolio diversification, portfolio rebalancing, estate planning, retirement planning and cash flow management.  However, there are also things that you can do and attitudes that you have that will help you accumulate wealth.

One of the more interesting books I have read that links people’s attitudes and behaviors to their ability to accumulate wealth is The Difference by Jean Chatzky (put Amazon link here).  This book offers common sense content for people who are serious about their finances.  Ms. Chatzky talks about four simple but powerful keys to financial security.  These are:

  1. Having a good source of income.
  2. Spending less than you make.
  3. Investing the money you are saving so that it grows faster than inflation
  4. Protecting yourself from risks – both large and small – so that when the inevitable bumps in the road happen you are prepared.

Key #1 – Have a Good Source of Income

The first is having a good source of income.  This can be a challenge in today’s constantly changing economy.  If you are a corporate employee, one of the best pieces of advice that I can offer is to gain the skills and experience that employers want.  This will likely require a lifetime of dedication to learning new things and being willing to take on new challenges, but it will pay off in a more stable and rewarding career.  It is interesting to note that there are currently over 4 million unfilled jobs in the United States.  This is true despite the fact that unemployment is still about 6%.  Work to gain the skills to make employers interested in having you fill one of those 4 million openings rather than waiting for a job to open with the skills you already have.If you are a corporate employee and have recently started up a side business or are considering starting one up, make a decision about how much of your corporate salary you want to replace before quitting your day job.

Key #2 – Spend Less Than You Make

The second key is to spend less than you make.  As simple as this sounds, I have seen many clients and prospective clients struggle mightily with how to achieve this.  For those of you who have difficulty in this area, I’d advise seeking out the services of either a good personal money coach or work with some of Dave Ramsey’s self-study materials.

Key #3 – Invest Money for Growth

Moving on to the third key – invest the money you are saving so that it grows faster than inflation.  This is the biggest area that a good financial advisor will help you to achieve.
Work with an advisor who will help you:
  1. Build well diversified portfolios to help you capture most of the upside when markets are surging while avoiding some of the downside during those inevitable market corrections.
  2. Use low-cost ETF’s to build your portfolios so that more money is left in your account to grow and less is heading out the door in the form of unnecessary, high fees.
  3. Develop a long-term cash flow plan that will clearly spell out your wealth accumulation goals and help you stay committed to a long-term investment plan.

Key #4 – Protect Against Risk

The final point discussed in The Difference is to protect against risk.  Work with your financial advisor to make sure you have an appropriate level of life insurance, disability insurance and personal liability insurance.  Your advisor can provide you with an impartial point of view to make sure that your interests and the interests of your family are protected without selling you unnecessary policies that offer little value for the money.As a next step, review where you are against each of these areas.  Make a list of specific actions you can take to make improvements.  Finally, make a commitment to pick one or two items to do off of your list each month to complete.  Addressing each of these four topics will put you well on your way to a more secure financial future!