Financial Planning Isn’t Really A One Size Fits All Model

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There isn’t a “One Size Fits All” model for financial planning.

 

Credit Cards

I love credit cards, no wait, I love reward credit cards!  But this is my one exception where I deviate from the norm with respect to my friends and their spending habits.

I have a few friends that have gone bankrupt (in 1 case a few times) and so I will never say “I love credit cards” to them.  I don’t want them to think that it’s okay to spend so easily.  We have to know our limitations and weaknesses.

However, for me, credit cards are a wonderful discount on my purchases.  Sometimes, I use the reward points to splurge and buy a nice gift that I would have had to spend money on.

Mortgage Pre-Payment

I took a path that I know isn’t considered the best for most, but it was the best for me.  You see, I pre-paid and them totally paid off my mortgage early.  I know that from a mathematical perspective it makes more sense to put that extra money in investments.  But I couldn’t stand the debt hanging over my head, and I doubt I would have consistently put the extra money into investments, thus defeating the plan.

I very proud of my accomplishment with my house, and if I had to do it all over, I’m pretty sure I would have done it exactly the same.  I especially like that fact that the money that I don’t have to pay anymore is like getting a 2nd job in many ways, especially with respect to cash flow!

While mathematically it makes sense to put the extra money into investments, missing in the formula is the human element.  The equation is mathematical but the human element takes away some of the straight math properties and adds emotion and impulse buying elements.  Shoot, I consider myself good with money, and even I sometimes have problems controlling my spending, especially when it some to my kids!

Investments

I tend to invest in stocks, but most of my money is in the mutual funds that are included within my 401(k) plan at work. 

In my stock dividend “Lunch Experiment“, I run a high beta investment portfolio.  This isn’t advisable and I’m only running such a portfolio because the money was money that I would have spent.  I don’t advise anyone to follow such a risky portfolio, but it’s still fun to play with!

Conclusion

So what I’m really trying to convey is that there isn’t a single generic “one size fits all” type of model to follow when it comes to financial planning or advice.  Perhaps start with one of the three financial advisors and then customize it after you find one that mostly fits your goals.  Personally, I’ve always liked David Bach with just a slight hint of Robert Kiyosaki.

-MR

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8 thoughts on “Financial Planning Isn’t Really A One Size Fits All Model”

  1. You are right! It is personal choice. I may disagree with you about paying off your mortgage, but it is far better to do that than add to credit card debt. Did you miss out on investing opportunities? Maybe, but you did at least earn whatever rate you would have paid for the mortgage.

  4. I was like you with the mortgage. I wanted a guaranteed rate of return and I wanted at least some of my savings to be in a tangible asset that I could touch and feel (like the warmth of my house).

    I was really tired of the volatility of the market and not ever having a good sense of how far I was from my retirement goal from day to day. Then I implemented operation reduce fixed expenses and I’ve loved every minute of it. Paying off a mortgage and making energy efficiency improvements were two ways I was reducing my fixed expenses and it felt good.

    • I walk with a lot more confidence knowing that I’m debt free. It’s those types of intangibles that nobody talks about because they can’t relate. I feel like Neo in the Matrix, where I put on my shades then look up, then fly up like a rocket! Very cool feeling.

      It’s more than math and theory!

      Once I have a somewhat stable dividend stream to handle real estate taxes, I’ll be a happy camper.

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