Editor's Note: Financial
security is basically what we work our whole lives to
accomplish. Financial security is something that few young
adults are concerned about. Retirement seems a lifetime away.
But as we grow older, being
financially secure becomes more important. We worry about it,
wonder how we will live in retirement, and base many of our
decisions on what will add to long term financial security.
Dr. Olson guides you through the starting process for becoming
financially secure and gives great fundamental principles to develop
your own plan.
Five Sure Fire Ways to Secure
Your Financial Future
Dr. Tom Olson
“You can be poor when you’re
young, but you can’t be poor when you’re old.” That was the
tag line used some years ago in a financial services television
Truer words were never spoken.
I was relatively poor when I was
young. Just about everybody I knew was and it was kind of fun. We
lived an almost communal lifestyle, sharing money, accommodation,
food, beer, cigarettes and other essentials of post-pubescent life.
Would it be as much fun if I had to do it again today? Could I do it
again? Not on your life!
Now I’m anything but a financial
genius but there are five basic principles that I’ve learned and
used to secure our financial future. And while far from wealthy, I
have every confidence that I will not have to live in a refrigerator
box whenever I quit working and that my wife will be able to
comfortably carry on in the event of my premature demise. (You
should know I’m at an age where I think eighty-five is a premature
Is building a secure financial
future akin to rocket surgery? Absolutely not— you need to do five
key things to get started:
1. Determine your short and
long-term financial goals. Start by taking a comprehensive snapshot
of your current situation—your assets, net income, debts and
living expenses. Once you’ve done this you can start setting long
and short-term financial goals. Decide what lifestyle you want to
enjoy between now and when you retire; what retirement lifestyle do
you expect to have and what sort of education do you expect to
provide for your children.
2. After you've assessed where you
are now and where you want to be in the future take steps to protect
your ability to get there--and stay there once you’ve arrived. A
major part of your family’s financial program is to insure against
major financial loss. There are simply no guarantees against serious
illness, accidents or untimely death. So take the steps necessary to
insure against loss of life, loss of income and loss of physical
3. Pay yourself first. Save at
least 10% of pre-tax income – more if possible. Pay down your
mortgage as quickly as possible, especially in times of low
interest. In the short term, you'll be better off reducing a
mortgage that costs you 6% than earning around a taxable 1.5% (or
less) in a savings account.
Maximize your RSP/401K contribution
every year and make the contribution at the beginning rather than at
the end of the year. Simply doing that will substantially increase
the size of your retirement nest egg when you’re ready to cash
4. Avoid credit traps. If you use
credit cards, always pay any money owing before interest is due.
Consider paying off your credit card immediately if you have money
in a savings account—as with the mortgage, the interest earned on
the savings is certain to be lower than what’s charged by the
credit card company. Avoid using credit cards for cash advances.
Usually the interest charges are higher for these and the charges
begin immediately. If you do carry a balance on your cards try to
negotiate a lower rate with the credit card company. If you need
money urgently, it's usually cheaper to negotiate a personal loan
with your bank or credit union.
5. Finally, protect your family in
the event of your death. Make a Will. If you die without leaving a
Will in all likelihood the only thing you’ll really leave your
loved ones is a bloody mess—one that could take many years and a
whole bunch of money to sort out.
Without a Will, the
court/government will decide how your property and possessions will
be divided. I would expect there are two chances of them acting in a
way consistent with what your wishes might have been—slim and
Making a Will doesn't mean the Grim
Reaper is about to pay you a visit. It simply means that your
affairs will be sorted out in the ways you want and, as a result,
you can go about your life with a peaceful mind because your loved
ones are protected.
These five principles are only a
starting point—a few suggestions that any financial management
professional can improve and expand on. If I have one regret about
how I’ve handled my financial affairs over time it is not
enlisting enough professional help. When we were starting, the
financial management business was neither as big nor as
sophisticated as it is today. Who knows, with better help, I might
be writing this from some warm Caribbean tax haven rather a cold
“Don’t try this alone—use a
trained professional,” is absolutely the best advice I’m really
qualified to give.
About The Author
Tom Olson is the author of Don’t Die With Your helmet On. Visit www.Dontdiewithyourhelmeton.com
for more information about Dr. Tom, the book and his work.