There was a lot of commentary on last week’s article. Here’s the discussion about the three important questions about investing.
Some of the commentary was as follows:
“How ‘safe’ is investing in various investment vehicles?”
“Joe, can investing really be this simple?”
“How do I know the amount of money I will need in the future?”
Answers to Inquiries
Well, investing does involve risk. Risk can be defined in many different ways, but the best way to think about it is how much money are you willing to lose?
Certain investments have different risk characteristics. If you don’t want to lose any money at all, it’s best to keep your money under your mattress or in the bank. But this may not be a winning strategy if you are looking to fund your needs in the future, such as retirement, and other large cash needs.
On the other hand, taking the three questions approach really narrows down what you are trying to do with your financial life. Yes, it really is that simple. The idea is thinking about where you want to go and working backwards from there.
The amount of money you need in the future is determined by how you live, your earnings, and other money decisions. So the amount of money you need in the future is really a long thought process and exercise.
You can sit down and try to calculate your future needs. Better, you can sit down with a financial planner and determine what it is you need vs. what you want. Then you can put together a plan that prioritizes your needs.
And then you go from there.
Wrapping it All Up
The discussion about the three important questions is wonderful. It’s great to have a healthy dialogue around this – with yourself or a professional.
The questions from last week are really important and aimed at keeping your financial approach to life as easy and simple as possible. The hard part is sticking to it. But with the guidance of a professional financial planner, you can do it. Let your planner do all the work for you, and free up your time, reduce your stress and concerns associated with money decisions.
Want to chat some more about keeping your finances simple?