As we approach being empty nesters this fall, I am convinced that the two most important elements of good parenting are setting appropriate boundaries for each child and using good common sense.
This is also the case with financial planning and investing.
Setting Boundaries
A key element in achieving one’s financial goals is to spend less than you make. Whether you call it a budget, a spending plan or whatever, you need to set boundaries around what you spend and what you save. While it’s fine to splurge once in awhile, your spending and saving should fit inside of the boundaries contained in your financial plan. Reevaluate these boundaries and if needed reset them periodically.
Asset allocation of your investments is a boundary. Again this should dovetail with your overall financial plan and should be monitored and rebalanced on a regular basis. Revise your allocation when appropriate for your situation.
Common Sense
While you may not be a financial expert you still can use the common sense that guides you in other areas of your personal and professional life here. Some examples:
· Especially in investing, if it is too good to be true it probably is. Be very wary of investments that claim outsized returns with low risk (Can you say Madoff?).
· If some financial “expert” on TV is trying to tell you that things are different this time, change the channel.
· If a financial advisor won’t house your assets at an independent third party custodian who provides independent account statements, get up and leave the meeting immediately (Again, can you say Madoff?). This is a huge red flag for potential fraud.
· If an advisor tries to sell you on an investing approach that you don’t understand with very high fees, tell them no thanks.
Setting financial boundaries and using your good common sense will go a long way in helping you achieve financial success. Ask many questions whether you are a do it yourselfer or especially if you work with a financial advisor.
As always, please feel free to contact me with any questions you may have.
I agree this is a nice blog. I found this post very interesting and informative as well. I will be visiting this blog more often for more post just like this one
financial planners Connecticut
Thanks for visiting the site and glad you enjoyed this post. I try to publish 3-4 posts per month. I have also begun blogging for Equifax Personal Finance Blog, here are my first two posts there. I will generally have a new post on that site every Tuesday. http://retirement.equifax.com/2011/02/planning-tax-deferral-strategy-for-your.html and http://www.stumbleupon.com/su/1zoMNh/retirement.equifax.com/2011/02/4-tips-for-loaning-money-to-family.html