jump to navigation

Let’s talk about overall strategy! December 8, 2008

Posted by shaferfinancial in Uncategorized.
Tags: , , , ,

There are two things that I agree on with the traditional financial planning community.

1. You should have reserves to help you through the tough times, because there will be tough times; and

2. Whatever strategy you choose (or allow someone else to choose for you), there is no reason to allow your fear/nervousness to get the best of you and change or eliminate that strategy based on fear.

Now, here is the Shafer Financial Way:

1. Create reserves first.  Save money inside a liquid fixed rate investment like a mutual fund until you have 6 months worth of expenses.  But this is a short term strategy to get started with.  Develop a long term strategy.  Perhaps start funding an Equity Indexed Universal Life Insurance policy, or use the money market account as both a reserve account and a pool in which to periodically buy Berkshire Hathaway stock.  In short, long term create reserve accounts that also will hedge against inflation for you;

2. Build a wealth creation plan.  This plan must be specific to where you are currently, where you want to be, and when you want to be there.  For example. your current working net worth is $40,000 and you want to have a working net worth of $3m in 25 years.  Then you need to create the investment(s), which will give you the best chance of getting to your goal with the least amount of inherent risk.  For example, if you need to get a 15% rate of return to reach your goal, then you need to build inside the plan the right investments that can accomplish that for you, using historical rate of return data as your guide.  You simply can’t build a reasonable plan based on beating the market, or based on financial instruments that have historically underperformed your needed rate of return;

3.  You need to fully understand the risk of failure to reach your financial goals; 

4.  You need to put all your resources to work for you.  If you have over 50% of home equity in your home, and you can take out equity to get you to the 80% mark, do it and put those dollars to work for yourself.  Don’t waste precious cash flow on luxury items until you can do so and still remain on goal.  That means buy cars that are over two years old, and don’t buy gas guzzlers.  Put off buying that entertainment center/50 inch flat screen, etc. until you can do so without having to put it on your credit card (unless it is only for payment convenience).  Concentrate on how you can increase your cash flow by starting a business, changing your job, etc.;

5. Make sure you take into consideration taxation.  It is most peoples #1 expense;

6. Don’t be afraid to take reasonable risks in order to invest in projects you are sure about, change your life to a wealth building life, and create the life you want to live.  It won’t happen if you don’t assume some risk;

7.  Find a mentor who has made his/her wealth or preferably pay for a wealth coach.  A wealth coach can make you hundreds of thousands of dollars (or millions if you have enough time) by just keeping your eyes on your goals.  Yes, this is self serving, but it is also true.  Think that Warren Buffett, Tiger Woods, Michael Phelps, etc. didn’t have coaches/mentors?   Of course they did.  Financial services sales people are not necessarily wealth coaches (usually they aren’t).  Wealth coaches might also offer financial products for sale, but they must not mix the two roles at the same time.  Look for a wealth coach that will refer you out to purchase financial products, therefore maintaining the integrity of the wealth coaching role ;and

8.  Now is the time to start.  Build your plan before the end of the year.  Implement it as soon as you can.  Change your life for the better! 







1. Insurance Guide - December 14, 2008

Nice bog you have here. I pretty much lurk the internet when I’m bored and read all I can about the organic lifestyle, but I really liked you view on things. I’ll bookmark the site and subscribe to the feed!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: