Wednesday, March 18, 2009

Consider Your Circumstances

Saving Money Tip #94 - Consider Your Own Circumstances. When reading financial magazines, websites, blogs, or books, we are presented with financial advice from the writer. Some of them are experts in their field and know very well what they are talking about. However, none of them know you, the reader, personally. Therefore, financial advice is often written for the general public or for “most people.” So, maybe 85% of the advice will pertain to you, while the rest will make no sense for you. Or maybe only half will apply to you. And which advice you should accept and which you need to discard is for you to decide.

You, the reader, have to take what you read and apply it to your situation. Does it make sense for you or doesn’t it? Unless you get a personal financial advisor who goes over your goals and needs, and then gives you heartfelt, sound financial advice based on your situation, you are going have to make sense of general advice and apply it to your situation.

For example, most financial experts will advise you where to save for college. Obviously, if you do not have children, you can ignore this advice completely. But suppose you do have a child, and he happens to be a hands-on, fix anything type person who aspires to be a carpenter. Does saving for four years of college still make sense for you? College may not be the right place for him to further his education. Then what? Is it still right for you to invest in the same education accounts that financial advisors generally advise? Maybe. Maybe not.

And many of us know the general suggestion of needing about 85% of your income for retirement. But what if you already have a paid-for home that you plan to live in? Do you really still need 85% of your income in retirement? How much should you save based given this parameter? Much retirement advice given is based on how to maximize your savings for retirement. But what if you would be happy living in a fishing cabin and fishing for the rest of your life? Do you really need to maximize your savings? Probably not.

What if you have a special needs child who will be in your care for the remainder of your life? You will need to factor that into the equation. I have never seen financial advisors give information on this situation. Where does government aid fit in? How do you make sure this child is taken care of after you are gone? What extra costs does his care entail?

While I am not suggesting that everyone needs to get a personal financial advisor, I am recommending that you read all advice given to you as a general suggestion. Then take all of the information you have learned and apply it to your life, your situation, and your needs. If you have unique circumstances, seek out guides that might address them. Perhaps magazines for the disabled address finances. Or maybe there are books out there that tell how to save for non-college bound children. Perhaps you need to find the research yourself. Overall, remember that general financial advice does not apply to everyone, and all of it may not apply to you. Your needs and wants are different that other people’s. And you are the best person to know what those needs are.

In Real Life – For now I think I am one of the general masses. At this point in our lives, we don’t have too many unique needs. My husband and I hope to retire when we are in our early 60’s. We plan to live on the East Coast. We do have a condo in Florida that we hope to use in retirement, but only in winter. So while I know we have a place to live if we need it, I generally keep it out of the equation entirely, as we would like to live somewhere else the rest of the year. While many financial articles give advice on how to put away some money for college, we hope to pay for a public university education entirely for our three children. So we have adjusted our calculations appropriately. Overall, though, our situation is pretty typical of most families’ needs.
But that doesn’t mean that things won’t change in our family in the future. And if things do change, we will have to plan accordingly. Maybe one of children won’t want to go to college or maybe he will want to go to an expensive private school that we haven't planned for. Maybe we will need to help provide for an elderly parent or maybe we will get an inheritance. The truth of the matter is none of us know what the future will bring. But we do know our situations now and can make predictions based on that. And as time moves along and things change, we will have a more accurate picture of our needs, and we will adjust our finances and savings at that point. I always consider the advice of the experts and am constantly reading financial articles to keep updated on new rules and changes. But I always apply this advice and new opportunites to our current situation and what I think will be taking place in our family in the future. I won't predict it 100%, but I do know better what may work for our family than a financial advisor who doesn't know us.

1 comment:

financial advisor said...

I agree, many people only get a financial planner to try and get stock tips to "beat the market". That shouldn't be anyone's goal. And if you have enough financial knowledge to put together a diversified portfolio of funds for your 401k, and that's all you need, then great. You should find a financial advisor for the more serious things you mention like an estate plan, trusts for a disabled child, long-term care planning, etc.