Here’s another post of our semi-regular column, “The Friendly Accountant,” written by Handy Reagan LLC Director of Tax Services Nate Reagan. Nate holds his CPA/PFS credentials, and his specialty is multiple related business entities and wealth management planning. In “The Friendly Accountant” column, Nate will share with us information that is relevant to ELGL members. Today, he shares eight keys to financial health:
8 Keys to Financial Health
- Financial Literacy for All – Educate yourself and your children. Financial management and investing are lifetime undertakings. Financial mistakes can be costly and devastating. Take the time to educate the whole family about making sound financial decisions.
- Stop Spending Money You Didn’t Make – Sounds simple, but too often ignored. Taking on debt to purchase a home, education, or even automobile are generally seen as reasonable. Never use debt to finance a lifestyle you simply can’t afford.
- Be Smarter Than Your Credit Card – Payoff your credit cards monthly. There is no denying that credit cards can provide nice rewards if used wisely and monitored with diligence. However, carrying a credit card balance beyond the due date can be costly beyond repair.
- Protect Your Assets – Get adequate insurance to protect against those unexpected events. Life, disability, homeowners and long-term care, are all types of insurance which may need to be considered. Just beware of those people selling you products on a commission. The annual cost to protect against a disaster to your finances can be minimal.
- Add to Your Retirement Early – Sign up to contribute to your company retirement plan at the first opportunity. If your employer matches any contributions make sure you’re taking the “free money”. More often than not we are now tasked with funding our own retirement.
- Understand Compound Interest – Compound interest is sometimes joked to be the world’s greatest invention. But this is no joke. Make sure you are on the receiving end of compound interest, rather than the paying end. Watch your investments grow with patience.
- Diversify and Repeat – Diversification was once considered boring. Look no further than the tech bubble of the late 90’s to understand the importance of diversification. Long-term investing shouldn’t be exciting.
- Develop a Financial Plan – Most of us realize our goals, whether financial or in life, are not achieved by luck but through developing and executing a good plan. Buying a Home, Retirement, and College Funding, all of these needs a plan. Plans don’t have to be perfect, just good.