While it can be, financial success doesn’t have to be the equivalent of a fancy French pastry: millions in savings, lavish spending, complicated investment schemes, and expensive guidance. The key to financial peace of mind is more akin to a simple and humble, but entirely satisfying recipe for pumpkin pie. You just need a few key ingredients treated with some degree of care.
A Recipe and Tips for Financial Success
Know What You Are Trying to Cook
Have you ever tried cooking a recipe that you have never tasted or even seen a photo of before? It is very hard. It is infinitely more difficult to create something when you don’t really know what that something actually is.
Financial planning is no different. You need to envision the future that you want to live.
And, your future doesn’t need to look like anyone else’s. In fact, you want to know a secret? My family doesn’t actually love pumpkin pie, so I make lemon meringue. Your financial goals don’t have to look like anyone else’s, the important part is having a goal and a goal that makes you happy.
Make Sure You Have All the Ingredients and Tools
Following a recipe is a lot easier when you know what ingredients and tools you need and you have all of those components on hand.
The ingredients and tools needed for financial success involve:
- Income (and spending less than you earn)
- Your values
- Saving adequately
- Protecting yourself from risks
- Some know how
We’ve got the recipes: The NewRetirement Planner is a whole recipe book for financial success. We’ll take you step by step to the future you want.
Read the Whole Recipe Before Getting Started
The one lesson I remember when learning to cook as a child? Read the recipe through to the end BEFORE getting started.
Following any recipe requires a sequence of steps that may or may not make sense without understanding the end goal. And, if you take a short cut early-on while baking, it may result in a disastrous dish. Don’t chill the butter and you’ll end up with a dense and greasy crust. Remove the pie from the oven too early and the custard is an oozy mess.
The same is exactly true of your financial life. You want to make sure that you are able to amass all the required ingredients and understand how to mix them together in the right proportions, in the right order, and with the right techniques to achieve the financial success you desire. You need a financial plan for your entire life.
Use the NewRetirement Planner to create and maintain your financial plan.
Your Budget: Kind of Like the Pie Crust or Foundation of Financial Success
How much you earn, how much you spend, and how much you save is truly the foundation of financial success. It is the crust or foundation of your financial pie.
You need to feel in control over your day-to-day and month-to-month finances as well as being on track to meet your long-term financial goals.
Maintaining today’s budget and planning for future spending needs are critical to your financial success and are the keys to financial peace of mind.
Invest: Bake Your Savings
So, if we can continue with the analogy, investing is like baking your pie. Your pie will be inedible if you don’t put it in the oven and wait for it to do its thing. Baking the pie is kind of like magic. You put an ooey gooey mess into a hot device and leave it alone while it transforms into a silky set custard with a flaky crust that, if you are a pie lover, is completely satisfying and delicious.
And, you don’t want to be peeking into the oven all the time and making adjustments while your pie bakes, you should put it in and forget about it.
You can employ the same strategy for your investments. Ideally you stick your savings into reasonable investments and simply wait for the money to compound. With a long enough time horizon, you can ignore the market highs and lows and just let the markets do their thing, especially if you keep your investing strategy simple. Many experts recommend a portfolio of index funds that you buy and hold over the long haul.
NOTE: A pumpkin pie is just one component of a Thanksgiving feast. And, depending on your investment goals and financial needs, index funds may be just one asset type in your overall portfolio. Here are some resources to help you determine what dishes you need and the best baking times and temperatures for financial success:
Best asset allocation at different ages
Is a retirement bucket strategy right for you?
Sample asset allocations
I Bond pros and cons
Manage Debt : For Financial Success, You’ll Want to Make the Right Recipe Substitutions
What is the analogy for debt in a pumpkin pie recipe? Debt might be the substitutions you have to make if you don’t start with all the necessary ingredients when you begin the recipe.
Sometimes recipe substitutions produce delightful results (Chinese five spice instead of cinnamon) and sometimes disaster (salt instead of sugar). The same is true with debt.
Taking on debt that helps you get ahead in life: some college debt, a mortgage to buy a home, and some car loans can be instrumental to your financial success (particularly a mortgage which can be more of an investment than a debt long term).
However, other debt can sabotage your financial wellness and make it impossible to ever get financially ahead.
A few years ago, a couple of days before Thanksgiving, our oven became erratic. It would start up, then randomly shut down. We called repair people, they were booked. We looked up what might be wrong and frantically ordered parts from Amazon, they didn’t arrive in time. Ultimately, we fiddled with it and just barely managed to get a turkey and all the sides actually cooked by turning the oven on and off every 10 minutes or so.
But, boy did I wish that we had a double oven – a back up.
For financial success, you will want to have back up plans in place for the things that are likely to go wrong: inflation, a long term care need, stock market ups and downs. However, you won’t be able to imagine and plan for everything that might happen, so here are a few additional tips:
Don’t Forget the Whipped Cream: Prioritize What is Important to You
Budgeting, investing, debt, risks can all be pretty stressful. However, money isn’t only a burden. In fact, money can buy happiness, especially when you spend to accomplish what is important to you.
You want to plan your finances to enable you to live according to your values and what makes you happy. After all, I don’t know anyone who really loves pumpkin pie without whipped cream (or even ice cream). Your financial life needs whipped cream too.
Share with the People Who Are Important to You
What is the real point of baking a pie and cooking a whole Thanksgiving feast? It is sharing it with the people that are important to you.
There is one thing that some people regret on their death beds and that is not spending enough time with the people they love. So, whether it is sitting down together around the same table or a holiday phone call, prioritize the people who are important to you and how you are spending your time.
The real trick of financial success is planning how to spend your time in addition to how to spend and allocate your money.