Starting Over

For some people organizing, creating and staying on point is easy-peasy. Not so for me. In order to get and stay organized I became a compulsive list maker. I have long days and multi-tasking is a must and not a choice. In order to stay organized and keep on top of things I make lists. It's something that works for me.

Lists keep me organized. But there are some people who get so overwhelmed just thinking about investments, planning and incorporating it into their personal and professional lives that nothing really helps, not even lists. A lot of times they throw up their hands and quit. So I'm going to give everyone who's interested a few tips to get on track. They're simple things and involve developing some basic organizational skills.

The first thing to do is know where you are. That means inventory all your assets, market value of your home, savings, collectibles, tools, jewelry, who owes you money, and investments. The next thing to do is to list everyone who you owe money to including the mortgage, college loans, credit cards, insurance loans, 401k loans, mom and dad and the like. When you're finished subtract one from the other and what you have is your net worth. Hopefully you are on the plus side of the equation. If it's a negative net worth you should concentrate on eliminating debt before pursuing any plan on investing for your future. In either case you know exactly where you are at this specific moment in time.

The next thing is to think of where you want to be. You may want to retire or start your own business or cruise the oceans in the boat you're building in the basement. Put a price tag on that dream. Since you don't know what the cost will be in the future write what you estimate to be the current cost. My web site has inflation calculators and go to www.primaryplanner.com and plug in the numbers you have and I would suggest a 3% inflation rate for anything over 10-years and 4% if it is less. You can print and save those numbers with your notes.

The second step plus the first is nothing more than your personal MapQuest. You now know where you are and you have a destination. Which, of course, are the basics of MapQuest.

The next thing you need to figure out is how to get from here to there. Since nothing is guaranteed at the very best you can estimate what you need to save and at what rate of return you need to get there from here. Here too my web site can help and do a reverse calculation. Let's say you have 20-years to reach your goal and you've saved $40,000 and the calculation shows you need to save an additional $8,000 a year at a 10% annual rate of return. But assume those numbers for you are a little rich. You can't guarantee(no one can) getting 10% on your investments or savings. So what you do is run alternative numbers of 25 and 30 years and reduce your anticipated returns considerably. What you are doing is creating some alternative routes to help you reach your goal if you run into an unexpected detour, much like 2008.

No matter how step 3 comes out at least you have a solid idea of where you are, where you want to be and what it will take to get there. Feel good about it since a lot of people never get to this point in the planning process.

Steps four and five involve common sense. Here is where you don't do crazy what-if-I-win-the-Lotto dreaming but develop reasonable expectations about what you want and what you need to get there. Don't jot down you want a zillion dollars as a goal and you need to earn 20% a year to get it. Make your objective as sensible as you can. It's your plan.

Step five is what investments you use to make that journey and that choice is strictly all you. Stick with what you know. Don't start investing in emerging markets if you don't know what an emerging market is. Don;t suddenly become a stock trader if your don't know how. Stick to the basics if the basics are what you know and are comfortable with.

The last thing to do is review your plan. You don't have to be compulsive about it but do it as it becomes comfortable. Do quarterly check-ups. Keep your notes and statements in a file or notebook and like magic you'll slowly but surely bring organization into your life. Don't worry about checking the values of your accounts every day. Warren Buffet once said he didn't check his personal accounts but once or twice a year. If it's good enough for one of the world's richest persons it should be okay for the rest of us.

If you have any questions about this blog call Paul Stanley@ 877 783 7080 or write pstanley@westminsterfinancial.com. Send Paul your e mail address if you want to be kept up on news and blogs.