Your Emergency Fund: How Much is Enough?

There may be plenty of factors outside of your control that impact your financial situation, such as the markets, the economy as a whole, or an unexpected illness. But those circumstances may not play as critical of a role in your financial life as you might think. The real dangers to your financial future are the lies you tell yourself when it comes to financial planning. Here are some ways you could be undermining your financial success and some ideas on how to change course.

Lie #1: I Don't Need Help. I Know What I'm Doing

Let’s say you read a plethora of financial planning books, stay up-to-date on the markets, and know all about budgeting software. That may put you ahead of a lot of other people, but there are certain aspects of financial planning that often go ignored even by the most knowledgeable people. Let’s look at a couple of hypothetical examples.

How Often Do You Review?

How often do you refresh your goals, adjust your plan, and determine how and when to make changes? A financial planner does more than just monitor your portfolio. They act as your coach, motivating and guiding you when things get tough. They bring an objective perspective to the table and develop a customized strategy based on your financial priorities. The end result is increased confidence in your financial strategies and decision-making. You don’t want to suffer a financial setback just because you were too busy or too forgetful to keep up with your financial plan.

In Case of Emergency

What if the unthinkable were to happen and you couldn’t make financial decisions? Will your family be able to handle the details and figure out your financial plan? An advisor can offer a holistic overview of your net worth and determine what elements need to be in place to protect your family and your wealth. These are often things you may not be aware of, such as life insurance or a living trust.

Market Research

Investing is tricky business on a good day. Can you manage the emotions, anxiety, and possible second-guessing of your investment choices if you were living on a fixed income and the market were to face a correction? An advisor has tools to evaluate cash flow to help you determine the probability of your money lasting through your retirement years. They can also keep you accountable and committed to your long-term strategy in the midst of market ups and downs.

Lie #2: I Can Always Get Help When I Need It

If you were going on vacation, would you rather have everything packed ahead of time and enjoy your restful break? Or would you prefer to be disorganized and arrive without essential items, forced to then spend your time off running around shopping for things you forgot? When it comes to money, it’s the same idea. When you really need the help, you may have lost your most valuable resource – time. Instead of thoughtfully researching your options and making decisions with a clear head, waiting until you need help will result in a frantic scramble to just get things done.

Whatever it is you experience in life, having a financial planner on your team will help you stay on top of your money and prepare in advance for future milestones and events.

Lie #3: I Don't Need An Advisor, I Have Financial Technology

Financial planning has evolved. Years ago, it was about who had the most up to date information on a company to buy a stock, and the planning industry was mostly concerned with buying and selling stocks and bonds rather than portfolio management. Today, financial planning is more about what’s missing in your overall strategy, what have you not thought of, and what could you be doing that you’re not. On top of that, the financial planning process helps you emotionally connect with your goals so you can get on the right track. Technology, at the present time, can’t do that.

Technology has many good points, but several drawbacks as well. For example, you can find more information than you’ll ever need, but you’ll also come across plenty of misinformation which could lead you astray. It’s not uncommon for someone to research something on the Internet and find just as many pros as there are cons. If you want to save for your child’s college education, you’ll find articles touting the value of using a 529, a Roth IRA, or a Roth 401(k). How do you figure out which one is truly right for you? The abundance of information has created so much noise that in many cases, people don’t do anything at all.

While technology should be used in financial planning, it should not replace the role of an advisor. The importance of what advisors do from a human aspect is help clients sift through the noise and misinformation and encourage them to move forward in taking action.

A Change In Perspective?

Have you ever believed one of these lies? It’s easy to do, but the consequences are real. Don’t take a gamble with your money. Join forces with a financial advisor who can help you make the most of what you have, where you are, and get you positioned for a bright financial future. Call my office at (949) 221-8105 x 2128, or email me at michael.loo@lpl.com for a no-strings-attached meeting to discuss your situation.

The road to financial independence isn’t always a smooth one. There are plenty of things that can pop up and derail us from our goals. Sometimes it’s an unexpected turn of fortune, like a sudden loss of a job or a medical crisis. More often than not, though, the things that derail us from our financial goals are our own financial bad habits.

There are a lot of financial bad behaviors that plague every-day Americans: impulsive purchases and overspending, not living within your means, lack of a financial plan for emergencies and the future. One of the most challenging aspects of financial bad habits is how unassuming they seem at first glance. Most of these bad habits appear to have a minor impact in the moment. Yet, living years with these bad habits left unchecked can do more damage to your long-term financial health than some of these situational detours, like the loss of a job or a medical crisis.

Awareness of these bad habits is the key to kicking them. Once you identify what they are, you can put steps in place to work against them. Not sure where your money is going? Make a budget and make sure that where your money goes reflects your values. Are you an over spender? Perhaps avoid those spending triggers like a mall or online vendors and give yourself a cash allowance rather than utilizing credit cards. Do you need to put more money away for an emergency fund or investments? Have money automatically transferred every month to ensure that you’re paying yourself first.

If you’re not sure what your financial bad habits are or how to fix them, working with a financial advisor might be your best course of action. Having a third-party look over your financial house and habits can help identify unhelpful behavior or areas of improvement. Our Decision Coach program was especially designed for those folks who may need some additional accountability and coaching. In fact, if one of your financial bad habits is lending money you can’t afford, a financial advisor can be a great scapegoat as to why you have to start saying No. We don’t mind being the “bad guy” to your loved one if that helps you stay on your path to financial independence.

The path to financial independence can have some pot holes, the most significant being our own self-sabotaging behaviors. However, the proper awareness can bring change. Changing any type of behaviors take time and support, and we’re happy to help those who are committed to helping themselves.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.