By Steve Doster | Mission Valley Money
Things sure are hectic with the new tax law passed right before year-end.
Hurricanes, fires and snow storms never seem to stop. The stock market has been on a nice upward run for the past few years. However, it’s not always that way.
It’s only a matter of time before the normal ups and downs of the market get people tossing and turning in their sleep. It’s enough to make you overwhelmed. But should it?
Heck no! None of us have control over these things. Yet we focus on them and create stress for ourselves. It’s a distraction from focusing on what we can control in our financial lives.
The first step to take control is to set a few life goals. Maybe travel the world, retire or change careers. Once you set some goals, it’s easier to figure out how to get there. Not having financial objectives is sort of like taking a road trip without deciding where you’re going.
How stressful would it be to jump on the freeway without knowing what city you were going to? You wouldn’t know how long you’d be traveling, how much money to take or if you’d have time to check out some sights along the way.
Not having financial goals causes the same uncertainty as traveling without a destination. You don’t know if you’re saving enough, when you can retire or what standard of living you’ll be able to afford in retirement.
Folks that don’t set goals default to the mindset of making as much money as possible. This leads to stock market watching. Since the only objective is to accumulate as much money as possible, an increasing market makes them happy while a down market makes them stressed.
In addition to setting some financial goals, focus on these four things that are well within your control:
- Pay off credit cards every month.
- Save at least 15 percent of your income.
- Don’t try to time the stock market.
- Have a diversified, low-cost portfolio.
Don’t feel bad if you don’t know how to do some of these things. I remember starting my first job after college with a mechanical engineering degree (many, many years ago). During the employee orientation, I had to make all kinds of decisions that I was not prepared to make. Was it better to put money in a 401(k) with pre-tax or after-tax contributions? How much should I contribute? Should I buy long-term disability insurance?
I was not prepared to answer any of these questions. Although I was embarrassed, I shouldn’t have been – and neither should anyone else. Personal finance is not taught in our education system. Very few people take a high school or college course in personal finance or investing.
One way to educate yourself is to arm yourself with knowledge. Most people would rather stick toothpicks under their fingernails than read a personal finance book. But try reading “Your Financial Travel Guide to Life” written by Sheryl Rowling. Using a travel theme, this book makes personal finance understandable, straight-forward and hopefully enjoyable. Visit bit.ly/2EPH1BK for more information about the book.
Taking charge of your personal finances really isn’t too complicated once you are equipped with some basic financial knowledge. Managing money is just a matter of someone taking the time to lay out the facts in a simple, logical format. Think about your financial goals and focus on what you can control. If you do that, then you will create peace in your financial travels.
— Steve Doster, CFP is the financial planning manager at Rowling & Associates – a fee-only wealth management firm in Mission Valley helping individuals create a worry-free financial life. Read more articles at rowling.com/blog.