The Investment Scientist

Achieving Financial Wellness

Posted on: March 25, 2012

[By Tom Warburton] So…how do we achieve ‘Financial Wellness’? 

This exercise sends us on an initial quest to ‘Figure out How Much Money We Need’ and how to ‘Accumulate That Amount’.

Maybe you’ve seen the advertisement on TV where the guy is ‘trying to figure out his number’.  The neighbor has a number under his arm and the comic figure of the commercial thinks his number is ‘A Gazillion’!

Well – we think we’ve figured out what ‘The Number’ is for most folks. As a general guideline:

  • Multiply Your Net Monthly Need By 300.

If you are 65, the above will be close. (Of course, individual age, health, facts and circumstances vary, so, we would need to meet with you to confirm the accuracy for you – which we are happy to do.)

Having derived ‘your number’, there are a number of paths one can go down to ‘amass that amount’. Some paths are quick and easy while some are slow and tedious.

  • Quick And Easy:
    • Inheritance
    • Win The Lottery
  • Slow And Tedious:
    • Build A Business And Sell It For A Handsome Amount
    • Work For An Employer With A Generous Retirement Account
    • Possess Assets Today Which Grow – Unmolested – Over A Long Period Of Time
    • Save Systematically And Let Those Assets Grow – Unmolested

It really doesn’t matter how you get there…you just want to get there!

Which of the above seems most likely to work for you?

This is a point we would be pleased to concern ourselves with toward assessing realistic probabilities…and plans for Financial Maintenance thereafter.

1 Response to "Achieving Financial Wellness"

Financial wellness? That’s simple. Whether you are a traveling musician, a barber, a humble postman, or retired and living on your investments the answer is the same. Consume less than you earn. I know this is true because I have been all of the above.

All of the savings and investment plans will work well if you can spend less than you earn. If life has pushed you to a position where that simple life equation is impossible, then no self help book, packaged plan, or life changing product will fix that.

In my life, I have had to use credit to do some things, I’ve been able to use cash when appropriate, and on some things I have had to say “no” to myself, or at least “not at this time”, so I could maintain a positive cashflow each month. Over a lifetime the small amounts saved add up and the habit of staying right side up becomes more ingrained.

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


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