One of the most important things to do to move towards your financial dreams, no matter whether you obsess about money (like me) or just want to get your priorities in order, is to develop a financial plan and an investing/saving strategy. The biggest thing problem I have witnessed is that many are in denial or even downright ignore their financial future.
Many are overwhelmed with just simply starting their financial plan. I have often heard people say that they are "scared" to prepare a networth statement, or a monthly income statement. I often tell these people (friends and co-workers) that, justlike getting your car "checked up", or just like you get an annual "check up" with the doctor, it is definitely important to get your financial check up. The key is just to act!
For many, simply adding their bank accounts, their investments, their home and investment properties and deducting all liabilities is as simple as logging into one or two bank accounts online, and throwing a few numbers on an Excel spreadsheet. Yet, why do people not actually do this? FEAR! They fear knowing that they are not financially secure, or that they have more debts than they can afford.
The fact of the matter is this: no matter whether you review your financial health or not, your financial condition is what it is. The real fear should be ignorance itself - you can only develop a plan when you know your starting point. Without a roadmap, you can't get to your destination. The same holds true with your financial health.
To conclude, make sure you check your financial health every quarter to see how you stand, and what you need to do to keep yourself on track. If you are more obsessive, maybe check monthly. A little work will go a long way to achieving your financial goals!
2 comments:
New to your blog. Financial checkup is important along with a financial goal. But personal finance and psychology are closely tied. People are scared to look at portfolios during an economic downturn.
Thanks for the comment tapan. I agree that psychology and personal finance are closely linked - in fact, I think human psychology is the biggest deterrent of people actually doing well financially or with their investments. During extreme moves like the past year, it's important to revisit your portfolio. It's a great time to see if your convictions (thinking you are able to handle deep drops in the market) match your reality. These moments are also important to reset your asset allocation (I am for example increasing my exposure to financials and US stocks), and temper your expectations. Everyone can make money in a bull market. It's how you deal with a bear market that can make or break your financial goals.
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