I have mentioned before that I have a strangely analytical mind, which makes me ideally suited to the puzzle of someone’s financial situation. There are a myriad of different pieces of the puzzle that need to be gathered and considered when dealing with wealth and money. Some of those pieces include the tax ramifications of each decision, how it impacts the risk of the portfolio, what is happening in the economy currently that might impact our choices and many, many other small and large pieces.
Yet, when it gets down to the handling of money, I’ll tell you a secret that you do not often hear …. this money thing is basic math. That is right, you can understand your money and wealth if you know how to do some addition, subtraction and maybe a little division.
I know that we in the financial world do not often tell you this, and there are good reasons, in my opinion. See, if I do not help you understand all the consequences of each of the choices you make, including the intertwined decisions involving advanced planning, then I heartily believe that I am causing you harm. Nothing operates in a vacuum, including your money decisions. So, when I take you by the hand and try to guide you down the tangled path of these choices, I want you to follow me with your eyes wide open.
So, why do I say, then, that this is just math? Because the important things that you do day-to-day are adding income, subtracting expenses and factoring in the goals that you want to accomplish. The decisions to buy or sell something in your portfolio are – at the heart of the matter – choices we make when we see a manager change, the portfolio drift away from their stated objectives or bad decision making over time. We compare the returns to the other funds like them, and decide if this is still a good choice for our future. We divide the return by the initial investment to determine the rate of return the investment has made.
See, simple math.
So, let me be clear … you may need a guide to inform you of all the other factors that can impact your money, yet you can do this money thing. You can absolutely understand money, handle money and make good choices for your money.
You might need a guide, but you’ve got this.