What does financial peace of mind mean to you? For some people, it may simply mean being able to pay all their bills every month. For others, it may mean having “x” dollars in savings and investments.
What would have to happen for you to experience financial peace of mind? Everyone has a “to-do” list. Maybe you’ve been meaning to review your 401(k) plan, consolidate your investments or have a Last Will and Testament written. Maybe you have questions about using a Health Savings Account or funding a Roth IRA for a grandchild. If you have questions, you need answers. Where do you get them?
The easiest way to achieve financial peace of mind is to understand what you can control and what you cannot control.
You cannot control:
- The stock market
- Interest rates
- Healthcare reform policies
- Real estate prices
- The economy
You can control:
- How much you spend and save
- Strategies to minimize income taxes
- Being properly insured
- Diversifying your investments and minimizing investment costs
- Having an estate plan for incapacity or death
Recognize that wishing for higher income or more assets will not provide you with financial peace of mind, nor will waiting to earn a higher income or accumulate more assets. The best you can do today is focus on being financially secure with the income and assets that you have. A recent survey by Merrill Lynch revealed that investors with a minimum of $1 million of investable assets believed they needed $7 million, on average, to be “financially secure.” Do you want to be the hamster racing on the wheel?
Financial peace of mind cannot be achieved alone. You must include the significant people in your life, whether that be a spouse and children, parents or grandchildren, siblings or other relatives, or significant others. Communication is critical and takes time and energy. Financial peace of mind is a great personal value to instill in your children.
Financial peace of mind comes from having goals and reasonable expectations. Have you thought about your goals and formalized them in any way? As the old saying goes, “If you don’t know where you are going, you’ll never know when you get there.” If your expectations aren’t reasonable and realistic, you will never achieve peace of mind.
So what has to happen for you to achieve financial peace of mind? The first step is to clarify your top three money concerns. In other words, what keeps you up at night? Then establish how you are going to address these concerns along with a time frame and deadline for each issue.
You may wish to break the issues that bother you most into categories, such as:
- Income and expenses (paying the bills and saving and investing)
- Insurance coverage
- Income tax strategies
- Education funding
- Retirement planning
- Charitable gift planning
- Estate planning
Can you do it alone? While you can take control of your finances on your own, most people find they don’t have the time or knowledge and experience to manage their personal finances effectively. If you fall into this category, it may make sense for you to seek professional advice. The Choosing the Right Financial Advisor worksheet on our website can help you find the appropriate advisor to help you take the steps you need to reach financial peace of mind.
About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com/.
