Head to Toe


What You Can Control

In the world of finance there is always a degree of uncertainty, whether it’s about the stock market or your retirement or how to make big purchases.  Having all of these factors that are beyond control are likely to cause unease or anxiety because of how much we have riding on mechanisms that are outside our direct control.  So, let’s look to an idea that has become cliche but is easier said than done: focus on what you can control. Today we’re going to look at the five factors of your financial life that you can control so that you can focus on those as you go through the planning process.

  1. Spending- The first factor you have control over is how much you spend and on what.  This is important because it allows you to adjust how much you’re putting towards big purchases and see how that affects the rest of your financial plan.

  2. Saving- The compliment to the spending factor, saving allows you to determine how much you really need to be happy every month and allocate the rest towards long term goals.  Being able to play with how much you’re saving can have dramatic implications on your plan as well.

  3. Timing- This is not market timing or trying to guess when to get in or out of the market, but timing as in when you want things to happen.  Do you want to buy a house in 2 years or in 5 years? Do you want to save for a child’s education now or start in 3 years? All of these decisions can have a large impact.

  4. Safety Net- I’ve talked about the importance of having a safety net before, and it’s one of the things you can directly control.  The conventional wisdom is to have 3-6 months of expenses so that you can effectively deal with any situation that arises, but increasing or decreasing that amount can show you the ramifications of that decision.  

  5. Risk- The last factor that you have control over is how much risk you’re willing to take.  There is no magic risk profile so make sure that whatever investments or strategies you’re employing fit your comfort level.  A large part of a bad investment experience is not taking the risk portion seriously and just assuming you fit into whatever is “standard” given your age range.  If you take the time to fully understand how risky you are and what that means, you’ll be more comfortable with your investments and plan strategies.

Some of these seem fairly obvious and simple, so you’d rather focus on getting the best returns or the most efficient retirement plan, but focus on what you can control.  With the volatility that’s been happening in the markets and the geopolitical risk that seems to be rising on a daily level, it can be best to go back to basics and make sure you’re aware of and comfortable with all of these factors.  If you have comments or questions, comment below or email me and we can look to see how you can more effectively look at what you can control.  

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