Money Strategies for the Fiscally Confused

Simple Strategies You Can Use to Jack Up Your Net Worth

Wednesday, March 01, 2006

Get the Whole Picture Before Making Major Money Moves

We make decisions every day of our lives without having all the information. This works fine for small decisions, but it can get you into trouble if you don't get the whole picture before making decisions with important things like your money.

I know a couple who recently discovered the value of getting the whole picture. They are in their sixties, but they had never sat down and took stock of what they have, what they owe, what kinds of returns they're getting on their savings/investments, etc. Basically, they had no clue where they stood financially.

They were probing me for advice, so I gave them an easy exercise that anyone can do to get a handle on what's what. I told them to take a blank sheet of paper, draw a line down the middle, and list their assets on one side, and their liabilities on the other. Then, they were to put a number next to each, add them up, and then see where they stood. After they figured this out, I told them to do the same thing, but with their income on one side (they were within weeks of retirement) and their expenses on the other.

They did most of each of the exercises before meeting with a financial planner. They said their meeting would have been horrible if they hadn't begun to see the big picture first. Instead, it was a very productive meeting in which they felt literate about their finances.

Something as basic as this can easily be avoided (especially if you're afraid of what you might discover), but it's invaluable. One must have a handle of where one is before one can know where to go. Get the big picture first before doing anything you might regret later.


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