In a survey to identify 2015’s most and least financially literate states in America, Wallethub.com ranked Idaho fourth in financial education and knowledge, and 36th in planning and daily habits. Although we placed higher than almost all of our northwestern counterparts - with an overall state ranking of 22nd, Utah (the only bordering state that beat us) came in second place.
State rankings are based on independent research that considered factors like: consumer spending habits, available financial education courses, and an individual’s rainy day fund. The findings suggest that, as Idahoans we may know our stuff, yet don’t put our knowledge to work.
These findings reminded me of a first meeting with a potential client couple. They knew a lot about different investing options, but had somehow struggled to establish a plan that would meet their future goals. We spent the entire first appointment discussing their current financial state and how they hoped to put their money to work for them. It quickly became apparent that this couple lacked some critical facts to turn their knowledge into a sustainable action plan.
Here are five tips that all investors should consider:
- Eliminate emotion from your planning – Make sure that the information you’re using to make your financial decision is relevant to your planning. Emotion can easily cloud your judgment and stop you from acting on critical facts. I’m not saying that you can’t have a favorite stock or mutual fund, just be sure that you’re not losing money because you’ve become a little too attached to a particular investment. Also, don’t allow your neighbor or golf buddy’s personal market analysis guide your investing approach or goals.
- Develop a Decision Making Process - Create your own criteria of “must haves” when considering investments. Fund objectives, current and past performance, and risk tolerance are all areas that I would personally identify for each of my investments. By establishing personal requirements for buys and sells, you can rest assured that your investments are consistently meeting your expectations. This will insure that when you’re in the heat of the moment, you will have a set of guidelines to help you accomplish your goals, not just make random or unnecessary changes.
- Consider Your Risk – It is not enough to simply consider how volatile an investment is in relation to the market. Have you considered how the death of your spouse or a future medical condition could affect your financial planning? Inflation is commonly overlooked in planning, exposing you to an income shortage in your golden years.
- Don’t Forget Taxes – Taxes are also overlooked. Before you sell an investment with a gain or loss, or before you start your social security or any pension, consider how the inflow of money will affect your income and ultimately your taxes. For example: if you have a highly appreciated stock or mutual fund, make sure that you know what the tax ramification prior to selling. This will help avoid surprises during tax season.
- Don’t Wait – “You’re too old! There is nothing I can do,” said no financial advisor, ever! Now is the perfect time to start planning for your financial future. If you’re not sure where to start, begin with a budget. Understanding the inflow and outflow of money is the first step to conquering your finances.
Just like my savvy client couple, I am confident that these five steps can help you create a meaningful plan with purpose. To see more from the Wallethub.com study or to see how other states rank, you can visit our website at www.journeyretirement.com.
About Jennifer Landon, Southeast Idaho’s Financial Educator and IRA Expert
Jennifer Landon, founder and president of Journey Financial Services, is an accomplished advisor, educator and presenter on financial topics. Landon has spent the last decade advising Idaho Falls residents on the wealth and retirement planning strategies needed to help them achieve peace of mind on their retirement journey. For more information about Jennifer Landon and Journey Financial Services, please visit www.JourneyRetirement.com.
Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold separately through Journey Financial Services, Inc. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, ED&F Man Capital Markets and Wells Fargo Bank, N.A.