This article is the follow up to last week's RateBow article and looks at the "fourth key to affordability."
When I ran track in college, I envied the Olympic athletes on our team. Not because of their amazing athleticism, but because the coaches had everyone run hill climbs, except the Olympic athletes. The coaches knew some athletes are born fast and some athletes had to climb hills to get fast. Financial athleticism can be similar, and pre-season training can be the difference between running with Olympians or not making it to the starting blocks.
Whether you are training for larger mortgage payments or to fund your own retirement, knowing what your race, technique, and how train is essential. So here are three principles from the track to help afford your race.
1.) Find your Race:
Before running your race, it is essential to get on the right "track." In track and field there are races with hurdles, starting blocks, baton hand offs, then there is the field, where entirely different athleticism may be required. If you don't know what race you're running, there's a good chance you won't be ready for whatever "hurdles" may come.
2.) Hone your techniques:
Perhaps you are saving for retirement, saving up for a car, preparing to send your kids to college, or wondering about long term care. With each of these "races" there are key techniques that can help you "run faster, jump higher, or throw farther." The athletes on our track team spent just as much time getting the technique down on their race as they spent on the physical training of the race. They knew they had to pick which race they would prioritize in order to run it their best. Even the decathletes had to narrow their focus to their strengths. They know the fastest way to miss out on points is by tumbling over hurdles or throwing a javelin out of bounds.
In finance the penalties are not exactly the same, and every goal may come with a different kind of strategy that impacts the "technique." With over 1 million different financial products, and over 4 million words in the US tax law, working with a financial professional, certified accountant, estate lawyer, or any variety of licensed "coach" can add immense value to your "race".
3.) Find Your Training Zone:
Our coaches knew how to make a training plan to take our team to its competitive limits, but they also made sure their athletes stayed within their zones, not only to get to their goals, but to avoid injury. In the finance world knowing how your savings rate, investment risk/return, and account values can impact your goals, could mean the difference between finishing the race or being late to your mark. Following a financial plan is essential for moving towards your financial goals.
Race Season:
Once you've made it through the preseason, the training doesn't stop, however, it will be different. During race season our training changed from intense base training to very purposeful event training. For those nearing retirement that could look like setting monthly withdrawals to offset lost income in retirement or preparing for the added expenses of Medicare and long-term care costs. The goal come race time is to be as prepared as possible for the known expenses in retirement.
Before any training begins you need to know what level of financial athleticism is attainable and know where you are starting. At Blacor we try to do this in our initial meeting. The goal is to build a complete picture of how your finances fund different goals, how your savings rate impacts your investment portfolio, how your investment portfolio impacts your future spending. Whether you fiscally train on your own or with a friend these principles are essential in taking the first steps.
Noteworthy references:
Securities offered through International Assets Advisory, LLC (“IAA”) – Member FINRA/SIPC. Advisory services offered through International Assets Investment Management, LLC (“IAIM”) –SEC RIA. Blacor Investments is unaffiliated with IAA and IAIM. The information provided is based on carefully selected sources, believed to be reliable, but whose accuracy or completeness cannot be guaranteed. All information and expressions of opinions are subject to change without notice and are those of Blacor Investments. Past performance may not be indicative of future results. This material is for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any particular security