Steps towards Financial Freedom
May 31, 2009 6:45 p.m. PST
Our country is in the midst of an economic meltdown. Many have seen their savings reduced by 50% or more. Some lost jobs or had wages reduced. While almost everyone is experiencing fear, it is the people who are retired or transitioning to retirement who are impacted the most. Financial bombs are exploding all around us and people are taking cover. This is really a time for action. The purpose of our series of articles is to help you come out of the bunker, gather all the facts and pragmatically analyze your options. We will provide a sense of where you are today and what is required to recover.
Thus far we’ve been writing about how to manage cash-flow. We covered topics ranging from how to increase your income to reducing expenses. Efficient budgeting is critical to any financial plan. Development of realistic expenses centered on a lifestyle that is filled with meaning and enjoyment is a skill we should all master. The era of free credit and spending is over for most. That doesn’t have to mean that life has to come to a stop. It means that frugal is in. We don’t need to go to the mall for entertainment. We must remake our lives. The goal, as it should have always been is to so live within our means. The result will be less stress and more freedom.
Money is really about freedom. This is the goal that many people strive for. The idea of free time with money to do what is most appealing to you. We contend that the lower your expenses are the easier it is to find that freedom. Material things don’t make people happy. Life is filled with meaning when you have time to spend with the people you care for. When you can do the things you want, with the people you want, achieving what you want you will find meaning.
To find financial freedom you must have enough resources that you can live life on your terms. That is the goal. Now we must go about redefining those terms, evaluating our resources and building a retirement plan that is within reach.
The good news that for many financial independence can still be a reality. We must learn from past mistakes. What went right, what went wrong in our financial lives. It is time to pick up the pieces and move forward. Be proactive, address your fears, evaluate your portfolio, understand your cash flow and ultimately make the adjustments required. Life requires flexibility so does retirement planning. We can’t control events of the world but we can control how we react to them.
The retooled retirement plan that is functional addresses all aspect of our financial life. Perhaps we work a few more years or work part-time at an endeavor that we have some passion for. Perhaps we reduce some of expenditures coupled today. We may be able to redefine our lives once financially independent by addressing what is important versus what is out of reach. A combination of these techniques used in conjunction with a solid investment portfolio can be the ticket to a redefined retirement plan.
Our focus now will be to introduce practical steps to help get your retirement plans back on track. Often times after large loss people are gripped in fear. They lock up hence the term "Dear in Headlights." We highly recommend that people accept what has happened. It is fine to be angry at Wall Street, banks and insurance companies that got us into this mess. However, at some point we must develop a plan to see us through. This process will help you deal with all the negativity surrounding the endless steam of economic news. Our intent is to help provide some solid tools to aid with your retirement plan. The topics we will cover are:
- Data Gathering
- Insurance Basics
- Expense tracking and management
- How to determine when you are financially able to retire
- How the economic meltdown affects your happiness and well-being
Part II of this series will provide discussion about investment concepts. Addressing what we have learned in this latest bear market. This section will include:
- Characteristic of a rock solid investment plan
- Modern Portfolio Management Theory as a solution
- Core-Satellite Portfolio Design
- Efficient Equity Vehicles
- Understanding Bonds
- Bond Strategies
- Cash Reserve Strategies
- The difference in portfolio design for an accumulator versus someone relying on their portfolio for a monthly paycheck (drawdown)
- Bear Markets how to protect yourself
- The importance of tracking investment return, inflation, taxes and spending
- Retirement Calculators how they work, their strengths and weaknesses
- Mid course adjustments
- Portfolio drags such as: investment fees, trading costs and taxes
- Development of a tax efficient draw down strategy
- How and when to rebalance
- Bringing it all together
We would like to make this an ongoing conversation. We welcome any
comments or suggestions for the additional topics.
Troy Daum
Staff Writer and CFP® at Wealth Analytics
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