“Going Forward” What Should I Do Now

By Mark Folgmann

A new client recently asked me what he should focus on during this uncertain economy and what I thought to be the keys to success over the next five years. It seems that on a daily basis I hear people say that recovery is right around the corner, from my office landlord claiming that the commercial market will recover within three years to the financial news media insisting that we are coming out of this recession. In my personal viewpoint, I’m not even sure if we have started the commercial market downturn nor do I know if the economy is rebounding. What if everyone is wrong? I believe the only things that matter are the things within your control. I have laid out a list of things that one can control over the next 5 years that I believe will leave you better off in the year 2015 than you are in the year 2010 simply by implementing these into your life.
Buy the right size home and use standard financing. The maximum home value should be no more than 2.5 times your household income with a minimum of 20% down payment on a fixed 15 or 30 year mortgage. If you can’t satisfy these three requirements; rent until you can.
Live within your means. Simply; spend less than you make. Save 10% of your total household income into your retirement program (IRA, Roth or 401k). This should be implemented until the day you die.
Develop a plan to eliminate all other debt by the end of 2015. Operate off of cash going forward. Build cash reserves with eliminated debt payments.
Implement a diversified investment strategy with your existing investments. Hopefully you learned last time that a balance approach works much better. I have many simple reads to help you accomplish this. One of my favorites is “The Coffeehouse Investor” by Bill Schultheis. This is a book that you can read in a couple of hours and be better qualified to handle your portfolio than most financial advisors.
Cost matter. Make sure you understand every dollar you pay in fees and cost. Remember each and every dollar you pay in fees is one less dollar you will have to support your retirement. Vanguard is always a great place to start here. Not only will they help with your cost but will also help structure your portfolios. Jack Bogel is one of my favorite authors and I would suggest reading anything he has written. His most recent book “Enough” is a great read.
Of course most of these suggestions are common sense to many but all will put you in a much stronger position. Just imagine if our leaders in Washington implemented the same list.