Wednesday, June 27

Keep steering the ship

Do you think that a lot of people ignore their personal finances? I suspect that they do, although perhaps not completely. Maybe they do pay their bills and renew their mortgage and maybe even contribute to their RRSP... but I think that a lot of people allow their overall understanding of their financial picture to get out of date. And when that happens, it is almost certain that you aren't making the very best choices for yourself that you can.

What I'm getting at is that your money life goes on with or without you. Interest accumulates on your debts, the stock markets rise and fall, your salary and inflation move forward (hopefully the right one goes faster). And your personal circumstances change. Married, divorced, kids, education, medical costs - it's all different every year.

So this year's financial plan will need some tweaking next year. If you don't do it for one year it may only be off by a bit, but if you leave it for three years I can almost guarantee that you will feel like throwing it out and starting again. The best way to steer a large ship is by making small, frequent course corrections. Your financial plan will benefit greatly from the same approach.

Disclosure: I have never steered a ship of any size in the real world!

4 comments:

The Financial Blogger said...

I totally agree with you. Everybody needs a financial plan. This plan should evolve along with your personal situation.
Making a lump sump payment on your mortgage while contributing to your RRSP is not financial planning. This is just good faith. Unfortunately, a lot of people think it is sufficient.
Cheers,
FB.

Frog of Finance said...

Nice post. Even when you follow your finances closely, it is easy to fall into the routine.

Once in a while, we need to take a step back and look at it globally. At those time, we have to be critical of our own choices and determine if we could improve some of the things we do.

Thanks,
Frog

Promod said...

Good analogy, MD. Planning isn't very interesting for most folks. Planning a vacation is more appealing than planning finances. So the ship sails without guidance.

fail to plan = plan to fail

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