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Strategic Finances



Once again if you managed to find your way here before reading A Glance at Finance or Neglected Finances, it might be a good idea to start there to get caught up. They are short reads and will help explain how we got to step three of our financially savvy process. However, for those that do not have that kind of time, I have a brief summary below. Thank you for reading and enjoy.

Our financial journey started by asking the essential question of "where are we," followed up by "where do we want to go?" and lastly "how are we going to get there."

The "where are we" question from step one, helped us establish a baseline for our finances. We discovered how our finances had been used and most importantly we were able to determine how our financial management reflected what we value. Moving on to step two we sought to find if this reflection matched up to what we truly want to value. This may have taken a few conversations with our spouse, or a few discussions with a trusted advisor, however the goal is to identify the values that had been misplaced or neglected. Finally, after finding our heading and plotting a course we are ready to set out on our financial journey and strategically implement these changes over time.

So how do you look at this point? By step three there needs to be an understanding of what it will take to manage our finances in a way that supports what we value. Perhaps you are behind on your retirement funding and you decide to sacrifice your daily coffee to put those funds into a retirement account. Or perhaps you are the owner of a small business who decides to invest some profits into road development outside your shop. Hopefully this investment not only supports community development but also increases foot traffic to your store. Whatever the values driving your financial decisions, a strategy that considers the risks, benefits, and timing is necessary when seeking to maximize these decisions.

I once heard a story about a man who saved all his retirement money in silver coins. He owned hundreds of acres and thought to hide his money throughout his land to keep it safe until he needed it. As he got older, he needed his savings to pay for various expenses, so he began searching for his coins. Unfortunately, as he aged, his memory began to fade. He couldn't remember all the places he had stored his silver or where he stored his maps. Fortunately for him he had some trusted help to search the land with metal detectors and they were able to recover most of his treasure. (true story)

The point of sharing that story is to demonstrate financial risk. There is no way to remove risk. At some point everyone must place their trust in something that can ultimately fail in safeguarding treasures. Whether you invest in the streets outside your store in the stock market for retirement, or money buried in the ground, there always exists a potential for harm against the things we value. Stocks will fall, silver can be lost or stolen, and the streets will need repairs again. Yet, there must exist something we would believe is more valuable than simple holding cash. There must be a reason to accept risk for the financial decisions we make.

Once again, we are drawn back to what we value. Values are the cornerstone of personal finance. Everything from spending, investing, saving, and borrowing relies on how we delegate our resources in a way to ascribe value. Step three of the financial blueprint puts our money where our values lie. If you value your child's college education more than a 5-star vacation, then we show that through our spending and saving. If you value saving money on taxes and preparing for retirement, then you contribute to a tax efficient retirement account. All these decisions have a financial basis and the principles from steps one and two help to direct how our resources are allocated.

Once a plan is in place it’s important to continue the process of reviewing values, monitoring how our finances reflect those values, and adjusting appropriately. For many people, a financial professional can help in a number of ways. Whether monitoring progress towards a retirement goal or coming up with different ways to stretch your dollar talking to certified and experienced advisor can help maximize your time, money, and ultimately your values.

If that is the point you are at now or are curious what that initial conversation might look like check out our the coming post Casual Finance.

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