American Capital Planning Blog

ACP Blog, created by Bonnie Ashby Sewell, CFP®, CDFA™, AIF®

When You Know, You Can’t Pretend You Don’t Know

How is getting and keeping a healthy body like getting and keeping your financial house in order? I'm responsible for everything that I put into my body. An obvious limitation is if I believe I'm putting in something 'healthy' and it is not. Even though it appears healthy and tastes healthy, it might have an ingredient I thought was benign but it turns out that particular ingredient is working against everything I was trying to accomplish with the 'healthy' food in the first place. And my ignorance has been in place for a very long time. The ingredient is MSG. It's avoidable but it will take diligence and persistence on my part to avoid it every time I eat. It's been in my food since 1976 (the first year I had a weight issue). Now I know.

In getting and keeping your financial house in order, you are responsible for everything you spend, save, and invest in. A really obvious limitation is if you believe you are spending frugally, saving enough, and investing in companies that will increase your investment but some or all of that might not be true.

Here's a way to check your spending: track one week – throw receipts in an envelope and include a simple list of any online purchases and bills paid that week. At the end of the week, spend a few minutes looking over what you received for your money. Does every expense track with your personal priorities towards your stated goals? If not, now you know.

Here's a way to check your saving: this one can be very confusing – if you never use credit cards for unexpected expenses and if you could lose your income and be okay for a few months and if you can meet your stated spending goals without worry, you might be saving enough. But for many of us, we want this and more. We want to understand if we have enough for scary stuff, for fun stuff, and for choices. This one takes planning and after more than 25 years serving clients in a planning role, I do not know a shortcut for the work of planning. Now you know.

Here's a way to check your investing: this one can be deceiving – there is only real return which equals what you get to keep after inflation, taxes, and the cost of investing. And you've got to overcome you. Do you study companies, markets, and risk? If not, are you working with someone who does and who is required to put your interests first? Do you believe investment returns can overcome a lack of savings? Successful investing always includes discipline, managing costs, and study. Now you know.

Will you still pretend you don't know?

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