Sunday, July 1, 2012

Too Afraid To Plan, Unprepared To Succeed

Written by Howard Ramsamugh

This is the dilemma many of us are experiencing now. Since leaving high school or college in the 70's, 80's or 90's, can you say that you really spent some quality time planning your financial future? Some of us are on our third or fourth job. The financial markets must seem like an uncharted territory to many of our brothers and sisters. Well, don't worry! I am going to try and get you moving again.

The first thing you need to do is to determine exactly where you are now. There can be big changes. By
now, I hope you have started putting money away for your future. If you did, then it is quite possible that your account balances are down significantly since in 2008, as the mortgage crises came to a head. Hopefully, you have recovered from some of your negative account value by now. Remember, you only have lost when you sell shares of stocks or other investments. Those shares still have value and you still own the same number of shares, if no sale has occurred.

Let us revisit the issue of the mortgage crisis so that we can reduce the chance of being blindsided again. What happened is that many Americans got caught up in the frenzy of making money easier and were willing to be less cautious in hope of becoming more financially secure. This trend of thought rippled across this great nation. This nation - teachers, policemen, lawyers, doctors, tradesmen, secretaries and others were told by their friends that real estate was "the" investment of the times.

The problem was not with real estate buying and selling. It was with the group thinking of the general public, and many professionals who were caught up in the conversation that real estate was the answer for all people. Blame can be assigned to buyers and sellers, regulators, and most importantly, lenders and appraisers to go around. As home prices escalated beyond historic norms, lenders became more enticed by the possibility of making more revenue selling mortgage debt to Wall Street firms.

This was allowed to perpetuate itself month after month and year after year. It grew into a bigger problem. It grew into Wall Street being on the hook for most of this bad debt. The problem got even bigger than that. Wall Street was on the hook, but who had the "stuff"? Millions of loans were put together to sell to investors. Many of the firms on Wall Street sold them to private and institutional investors. Institutional investors (your pension) manage assets such as 401k, 403b, 457 and IRA.

This was the environment many investors found themselves as the financial markets needed to correct itself in 2008. This has led many of us to be too afraid to plan, and unprepared to succeed as we adjust our individual finances. No problem! The first step to get back on track is to know what happened but to not get
caught up in the reverse of the mortgage crises. If you are too afraid to resume saving for your future, you are essentially giving up on your financial future and your retirement.

I know you do not want to do that. It makes no sense to be around for the CRASH, but nowhere to be found for the recovery. You may not have understood your investments before. Now is a good time to allocate some time to learning about your finances and getting a financial checkup done.

Secondly, you need to realize that things have changed and you may need to change. There was a time when fathers and mothers, aunts and uncles went to work and there was a pension in place to provide income for employees in their retirement. Strong companies prided themselves on their ability to provide a check to employees after years of service. You should know that that level of joint effort is dwindling fast and should not be expected in the future.

Therefore, if your employer provides a pension you should expect changes in benefits or contributions in years to come. I fully expect employers to have more and more workers to contribute to a pension directly and not the company making that 'contribution'. Contributions can always be cancelled or obligations shifted to another party. This is a common practice in many school districts in America, as teachers pay into their own pension plans directly. Be prepared to experience change and recognize the changes that may come in the future.

Thirdly, know your finances and be determined to win. Life has always been full of good and bad, ups
and downs. We are living during an era that requires knowledge and determination to retire comfortably. There is no cavalry coming to rescue you. You have to help save yourself... You are the architect of your own financial success.

Therefore, you are going to have to take more time and care making financial decisions and not put them off. The hardest part is to "refine" your thinking and have your thoughts defined, then you will be ready to implement your plans with conviction. Most people just need a little more information before making a decision to invest or purchase insurance. This can be your time to get it right. Believe that you are ready. You may have been knocked down but you are not knocked out. Visit for more financial information and share with others. No investment strategy can guarantee a profit or protect against loss in periods of declining values.