It may take a few passes by that classic book until you actually pick it up and begin reading. But once you do, a classic story can keep your attention and refresh your mind. After a few paragraphs or chapters, a classic read can grab your attention and hold it page after page to the end. When you review and take a few critical steps to manage your money, there’s a true sense of accomplishment and enrichment, much like reading that classic book.

Why the hesitation?

We often hear, “I don’t know what I spend”, or, “I want to retire in 5 or 10 years, but, not certain if I can”. Well, there’s no need to be sheepish or to wonder. Just like that classic great read, once you pick-up your bank account and investment statements and start reviewing them, you’ll feel a sense of accomplishment. And, when you get a financial planner partner, their role is not to judge, but to nudge. To nudge you in the direction that accomplishes what you’d like to accomplish! Judgement of one’s spending is not what a good planner will provide. But, nudgement (not a word but–appropriate here), is what a good financial planner should provide.

Step One: Understand where you spend your money. 

This can be an eye-opening exercise. And whether you’ve been dreading clarity or looking forward to it, it is an important and enriching part of your financial journey. Interestingly, we’ve found that most people really get into the investigative part of reviewing their spending plan (historically called a budget). As hard an exercise as some think this is, there’s actually an easy way to accomplish a review of your spending. 

Step Two: Take a look at your investments– a good look! 

How have your investments grown over the past 10 years? Are your savings and investments well positioned for the next (future) 10 years or more? Are they positioned to provide the value for you to retire when and how you’d like?

Many people feel they did well over the past decade. And, in most cases, one should have done well if invested at least to some degree in the U.S. Stock Market. Did you know that the S & P 500 Index had an average annual total return over the past 10 years (as of June 18, 2021) of approximately 14.92%? But, what will the next 10 years bring? Will the returns of the past 10 years continue? Or, will returns be more muted and similar to the period from 2001 to 2011 where the average annual total return of the S & P 500 Index was approximately 3.84%?

Step Three:  Take a look at any debt and student loan debt in particular. 

At a certain point in life, many people have some level of consternation about saving and investing. And this is often because of that student loan or other debt that may have accumulated. While we don’t like debt…there is a point at which you’ll need to pay yourself (save) while you’re paying off that debt. And this can be tricky to determine, especially if you don’t have a good idea of what you spend monthly or annually. But, Wow!—the sense of calm and clarity that we see in people who actually review and understand their spending is amazing! To quote many a client, “It was eye-opening! I didn’t realize how much I spent on _____ (you can fill in the blank here on just about anything). 

Once you actually see what you’re doing with your money, you then have the opportunity to make better decisions. With clarity, you get to choose whether or not there is anything you can or want to change in how you manage your money.

Next steps…

The world and the markets are changing and we think it’s more important than ever to understand both your spending and investing. Review and determine how much return you need on your money going forward and therefore how much risk you need or do not need to take. There’s a certain level of satisfaction and enjoyment you’ll get out of planning and understanding your financial life. And, you’ll be better equipped to manage your money. So, as you pick-up that summer read, get started reviewing your financial life as well. The control, sense of accomplishment and yes—enjoyment you’ll feel will be worth the time.

Sources:

S&P Down Jones Indices:  https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview

Y Charts:  https://ycharts.com/indicators/sp_500_total_return_annual

Lenity Financial, Inc. : https://lenityfinancial.com/what-should-financial-advice-look-like-2/