It should not take the filing of a tax return or a death in the family to finally create order out of paper chaos so you are not forced to scramble in those critical circumstances. The chances of making costly errors are too great not to take some very simple, albeit essential, measures to get and stay organized all year long. Today you can begin a system of document disposition which will simplify your financial life for you and your family. It starts with knowing what you need to keep, for how long and where to keep them – beginning with the most disposable:
The saving versus paying off debt is an age-old quandary that has plagued people since the advent of consumer debt. Pose this question to a group of financial planners and the responses will be split, roughly down the middle. While there might be as many advocates for savings as there would be for paying down debt, the broad consensus will likely be that it really depends on the situation.
The decision to go forward with your plans to start a family is a joyous one, but it can also lead to increased stress especially if your financial house has not been child-proofed. Considering that, on average, the cost of raising a child now exceeds $300,000, there’s little margin for error for most young families that have other important financial goals to achieve. There’s no reason why you should get caught off guard or caught in cash crunch as long as you plan ahead.
After costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar for any time period.
—William F. Sharpe, 1990 Nobel Laureate
The efficient markets hypothesis implies that no active investor can consistently beat the market over long periods of time, except by chance. Yet active managers continue to test the hypothesis every day through their efforts to pick stocks and time markets. The evidence clearly shows that their efforts are not worth the high cost borne by investors.
After market-risk and inflation-risk, which investors take great strides to mitigate through sound investment practices, taxation-risk presents the biggest obstacle to building wealth. A sound investment strategy not only seeks to generate returns on your capital, it also seeks to preserve as much of your capital as possible to keep it working for you. One of the surest ways to preserve your capital is to reduce the amount of taxes you pay on investment income and gains.
For many Americans, building true wealth might seem elusive, even illusory considering that many people, who very recently were sitting on six and seven figure 401k plans and home equity values, now feel unprepared for retirement. The lessons learned from the financial crisis is that wealth can be fleeting. However, wealth creation always has been, and still is a process grounded in sound principles and practices that, when applied with discipline and patience, is possible for most people who can understand and embrace the keys to building wealth.
In my opinion, it is impossible to predict future stock market returns. Investment models can produce hypothetical returns but they can’t account for future events. So, in my opinion, investors who manage their investments based on market performance or what they perceive as opportunities for better returns have very little control over the outcome.