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Taking Control of Your Financial Narrative


Taking Control of Your Financial Narrative

Going through the motions of life makes it seem like many aspects are completely out of our control. This is a common misconception. While there are areas that we have no control over, there are a few areas that we have total control and other areas where we have partial control. 

Areas with total control:

1. Saving versus Spending:

    We are in total control of the amount of money that we save. How can you take control of this area? One way is to develop and follow  a budget. Doing this does not guarantee success. We all know that life presents us with things out of the ordinary. This is where an emergency fund comes into play. Having an emergency fund is one of the first and most important "investments" that I make sure all clients have. Every client is different but the recommendation ranges from $1,000 to between 3 to 6 months of expenses.

2. Asset Allocation and Location:

Asset allocation speaks to how your money is invested. Are you positioned 100% in a Domestic Large Equity Vehicle like an S&P 500 index fund1? Perhaps this matches your risk tolerance or perhaps you chose this for other reasons. One way that I can help is to look at your risk tolerance and allocate your money in a way that is in-line with your tolerance and goals. 

Location, refers to this is where assets are held. Under number one, we briefly touched on Emergency Funds. Typically I recommend to a client that this should be held in a separate account from the checking account funds used on a daily basis. This aids in the effort that the money will be there when you need it. You are not seeing it daily and it makes it slightly more difficult to access. Another "location" meaning can be where your investments are held. Are they in a Employer Sponsored plan? a ROTH IRA? a Taxable Account? There are numerous possibilities.  

Areas where we have partial control:

1. Employment Earnings and Duration:

You can take steps here to gain some control of this. One way is to add additional skills, this can be done through the traditional route of college and shown with a degree. You can also take it upon yourself to learn a skill in other ways. One additional way that you can learn skills is creating your own course of study by renting or buying a book on your intended skill. With this route you will have to prove yourself through taking on an opportunity to show your new skill. 

Another way you can take some control is by keeping track of your value in the open market. Your current employer may not value you in the same manner as an outside employer. This can be risky if you jump to a new company. If the economy were to turn and need layoffs- you might be more likely to be laid off at a new company than at your current company due to how long you have been there. 

Control over duration can be gained by the next area: Longevity. You are more likely to have a longer duration of employment if you are healthier since you can continue to work longer. Again, you do not have total control since you are not the only one that determines how long your employment lasts. You can also attempt to lengthen your duration of employment by not falling back and becoming stagnant. If you continue to strive to be better each day, it will eventually get noticed; just like it will be noticed if you continue to "phone it in."

2. Longevity:

We have a little bit of control in this area of our lives. If we treat our bodies well and exercise we can increase the ability that we have to live a longer life. However, diet and exercise alone do not determine our longevity. I personally have Celiac Disease, a hereditary condition which according to my Doctor can possibly shorten my life expectancy. If I don't follow a gluten free diet I can end up shortening my life expectancy to a greater magnitude. I could be hit by a bus tomorrow, at that point obviously my diet and exercise did not help lengthen my life expectancy like the plan my Doctor has laid out. 

Areas where we have NO control:

1. Market Returns:

Market returns are completely out of our control and historical returns do not provide an indicator toward future results. Our Asset Allocation can determine how we participate in a given area, but will have no bearing on how an area of the market performs for the given time period. 

2. Policy regarding Taxation, Savings, and Benefits: 

Policy changes are completely out of our control. We are able to cast our vote for the individuals that work on policies and regulations in the Capitol for us, but that is our only bit of control in this area. This area does however show a need for on-going planning. For instance, you might have an ideal plan set up for today but a regulation change may mean that your plan needs a tweak to stay on the right track.

To learn more about taking control of your Financial Narrative contact me today! We can set up a Fit meeting to determine if you and I would work well together. Thank you.


1 Index Fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor's 500 Index (S&P 500)