Recently, I was asked if I have any simple rules for financial planning. The truth is, there are many things to consider, because wealth management is complex. But the question got me thinking. If I had to simplify all the knowledge and experience I’ve gained into a few simple ideas, what would they be? Could I come up with three core rules for financial success?
In my career as a wealth advisor to women, I have developed three simple rules for financial planning that I believe will help most women stay on track towards their financial future.
Rule #1: Spend Less Than You Make
It may seem obvious, but many women don’t manage to follow this first rule. The Pew Charitable Trusts published poll results last year in which 55% of people said they break even or spend more than they make each month. It’s simple math; if you spend more than you make there is nothing left over to save for the future. Spending more than you make is even worse, with the deficit ending up on your credit cards.
As women, we often have financial obligations to others that we must address in order to save enough for our future. Do you overspend on children, friends, or parents? Let them know that you’re putting your financial future as a priority so that you can look forward to retirement. Set a good saving example for your children to help them get on the right financial track.
Rule # 2: Save As Much As You Can
This rule is only possible once you are following Rule #1 successfully. Once you have the opportunity to save, it’s important to put money away into your investment accounts. While most of us understand the importance of saving, many of us are not saving on a regular basis. The Pew poll found that a third of Americans have absolutely no savings and a whopping 83% worry about a lack of savings. The only way to get past the worries is to begin saving and save as much as possible.
By working with an experienced financial professional, you can decide how much you can afford to save, then automate the process so your money is deposited into your investment accounts each month. Be sure your investments match your risk tolerance and time horizon and don’t forget to consider the impact of taxes.
Rule # 3: Don’t Do Anything Stupid
While saving can be a lot easier for someone making $200,000 than it is for someone earning $20,000, the propensity to make mistakes with money seems to be the same for both. We are all at risk of breaking this rule and must be aware of our tendencies to make costly financial mistakes that set us back in our financial plan.
The two things that can help you follow this rule most effectively are knowledge and accountability. A trusted accountability partner will keep you from cashing out your nest egg and a solid understanding of financial markets will help keep you from investing inappropriately for your situation.
Investing isn’t easy or simple, but sticking to a set of core guidelines can help us make better decisions. At Engaging Women in Wealth,, we’re not just here to help you understand the rules of investing, we are here to help you follow them as well. Get in touch with us by calling our office at 858.756.0004 or emailing us at [email protected] You can also pass along this article to your friends and family and let them know we’re happy to speak with them if they have any questions.
About Deb Sims
Deborah Sims is the Principal of Estate Management Group, a wealth management and financial services firm offering comprehensive and customized strategies to help her clients manage their assets and feel confident in their future. Her mission is to serve as her clients’ most trusted wealth advisor through professional knowledge, integrity, and personalized wealth management services. Based in San Diego, California, Deb’s team has offices in Rancho Santa Fe, Old Town, and Del Mar. She invites you to contact her team today to learn more about how they can help you.