Is your financial freedom and success influenced more by who you are than by what you know and which financial planning ideas you follow? Is it possible wealth-management and financial-planning tips are like golf or weight-loss tips? That is: hundreds of those tips are great advice in general — but only a few will actually work for for you.
If so, the challenge is to determine which financial planning tips will work for you.
Individual financial planning success is significantly impacted by the following three things:
- our psychological and emotional DNA
- our knowledge of who we are
- our understanding of our ability to control ourselves
Therefore, it must be at least equally important to understand ourselves as it is to understand what are best practices for wealth management and financial planning.
Here are a few of today’s very popular financial planning best practices — followed by examples of people for whom these planning tips may not work well:
Pay yourself first, lock the monthly savings away for emergencies and for retirement. Pay myself first? But I’m always drawn to wanting more and thinking I could satisfy those wants with my savings; after all there is plenty of time to pay my savings back.
Refinance your home mortgage at today’s low rates and pay it back later with inflated dollars. Yes, but will I show the good judgement to use the monthly mortgage payment savings to invest and accumulate funds for that later repayment — or will I use that monthly savings to raise my cost of living? After all, I’ll have my job, my health and the funds later.
When paying down debt always pay off the highest interest credit cards and loans first. Yes, but the bigger question is: Can I commit to not borrowing again?
Invest in the stock market; over time it always goes up. Yes, which is why it makes little sense to pay a professional for investing advice. Besides, I have more than a few hot tips on a handful of obscure penny stocks that are going to make me a fortune when those companies finally hit the big time.
With all that in mind, one might say that the most important financial planning tip for most of us is “know thyself.” So determining the answers to the following questions should help you select the right financial planning tips for you:
- Am I willing to defer gratification? Can I wait four months before acting on an idea to purchase?
- Have I accumulated and managed significant financial assets during my years of working?
- Do I have the gift of discernment? (Said another way: Am I skeptical at the right times?)
- Am I impulsive with money? (When my friend buys a car, remodels the kitchen, etc. do I follow?)
- Am I envious of others when I compare their possessions to my possessions?
- Does the quality of my decisions change when I’m emotional, stressed or feeling mistreated?
- Do I believe my status or worth is defined by my possessions versus the quality of my character?
- Do I have the gift of wisdom and/or good judgement?
- Do I believe everything I’m apt to think?
The Bottom Line
Pythagoras once said, “No man is free who cannot command himself.”
Knowing yourself will help you find the financial planning tips that are perfect for you — and it may even guide you to identify the tips that may turn out to be financially disastrous for you.
Photo Credit: stock photo
Excellent food for thought here! IMO everyone reading this could learn something about themselves by thinking honestly about the ideas presented. :o)
I wholeheartedly agree, Lauren! Antonio’s article is a real gem.
Great truths. Learn yourself.
Len, I love this. What I would also love is your addressing “do you really need a financial planner?” I read everything about retirement planning that I can get my hands on. We took a serious slide backwards during the Great Recession, but we are working hard on retiring debt free. I am calculating that our RMD will be just enough after social security & a small pension to live satisfactory lives (and I may work longer now that they pushed the RMD age to 72). We got long-term policies at decent rates ten years ago. We paid nobody to help us with our decisions. Do we still need professional advice before we do retire?
I think that all depends upon how well you know yourself, and how confident you are in your own planning. Speaking for myself, if I had any doubts regarding my retirement management plan, I would have no problem going to a professional for a second opinion.