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Understanding the Rules of Finance

Have you ever felt like no matter how hard you try, you just can’t get ahead? “Financial rules” can seem to be set up so that they only benefit those who have made them. When planning for your financial future, it’s important that we understand these rules and how they can affect our success. Just like any game, you need to really understand the rules in order to win.

So, how can we become better equipped to play the game? If we are not careful when planning for our financial futures, we may be dealing with institutions who want our money, want it systematically, want to hold on to it for as long as possible, and want to return it little by little when we want it back. Luckily, we’ve figured out how we can reduce our lifetime financial costs while capitalizing on creating wealth, protection, and a lasting financial legacy.

First, you must change your ideas around money. Just because money acts like a number doesn’t mean it is. Money and math are not the same thing. Money has properties that cause it to increase or decrease in value. These wealth eroding factors change the value of our money over time. Things like taxes, inflation, law changes, technological changes, fees and consumer financing, increased standard of living, market fluctuations, and unexpected life events are just a few of the myriad host of wealth eroding factors that are ever present. If we want to avoid this ongoing loss of wealth, we must look at money more systematically.

Start with protection. Protect yourself first because unforeseen events can happen at any time. Then, make sure you’re saving at least 15% of your income so that you’re not vulnerable to wealth eroding factors. It’s also important to have liquidity in the case of emergencies, opportunities or when you need money. If you don’t have liquidity, when you need money you either go into debt or stop other important contributions to long term planning. By having 6 months worth of your income saved, it will give you some peace of mind.

When it comes to planning for retirement, make sure you have followed the above steps first. This way you're in a better position to save for retirement. Contribute up to your employer matched retirement savings account, then put money into other types of savings accounts. It’s really important to consider what tax bracket you might be in when you retire. This is why various types of income in retirement makes sense.

Lastly, you want to make sure you are growing your money. Start by being a lender; put money into government, corporate or municipal bonds. After that, you can start to put some money into stocks, mutual funds or a portfolio of assets. And don’t forget to look at hard assets, like business or real estate, as another option for growth.

By following these money rules, you’ll see that your financial life is a lot more organized and your money will work more effectively and efficiently for you. Give yourself this peace of mind. Talk to your Leap Adviser today to about how you can get started learning how to protect, grow and enjoy your wealth.


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