It's funny how the English language can be so exact sometimes and completely misleading at others. Unfortunately, the term 'personal finance' is one of the damaging and completely misleading uses of our language, and it's got to stop.
What do I mean?
Personal finance, by definition, should be about you and your beliefs as much as it is about the bottom line; but all too often, this isn't the case. Truly personal finance would start with understanding who you are as a person and what you believe, then aligning financial options with those ideals.
If you've ever had someone sit down and ask you which stocks or funds you want to invest in, then you know that this rarely happens. Usually, the 'adviser' (aka salesman) doesn’t ask what you believe, what you know about, or anything beyond how much risk you want to take.
He then shows you how (amazingly) what he represents is the perfect fit for your situation. Is this a coincidence? Not likely.
It's very similar to walking onto a Ford car lot and asking the salesman what kind of car to buy. He's biased and doesn't make any money if he tells you to shop elsewhere, so he doesn't. Regrettably, most financial advisers operate the same way and lead you toward the product they sell. In most cases, this is the stock market, but it could be anything: gold, oil, real estate, etc.
The questions that come up through this process are: why is this a good investment choice for you? Why not something else? Do you even know anything about this investment or how it works?
If you invest in something as broad as the stock market, do you know where your money will go or what it will be supporting? What if you found out that your money was supporting large pharmaceutical companies, big tobacco, or other industries that may not align with your values?
I know those are a lot of difficult questions, but they are important to consider with ANY investment.
You work very hard to earn your money, so understanding how it's being invested and protected is vital. Sadly, just as people have been taught that drugs are a one-size-fits-all for health, traditional investments have been presented in the same one-size-fits all way.
The good news is that there is a better way. The bad news is that it's not just about investing. Just like going from being ignorant to learning how to properly take care of your health, it takes a little work and education.
As a first step, start by asking yourself the following questions to see how healthy your financial plan truly is:
Do you have a clear plan to keep your cash flow optimized? In other words, do you have a plan for paying down debt and minimizing interest rates paid on loans and credit cards? Do you regularly review your plan as life and conditions change?
Do you have the proper entity structure and layout for your business to minimize the taxes paid? We've seen that, even with docs who use a tax professional, more than 90% are still grossly overpaying taxes each year.
Do you understand your insurance coverage and why you have chosen the plans that you pay for every month? Improper insurance coverage leaves your business and family exposed to one of the leading causes of bankruptcy.
Have you created a clearly articulated, specific investing strategy that represents how you want your money invested? If you don't know what your plan is, then your ideas may easily be swayed by every professional salesperson that walks through the door.
There are others, but these are some of the areas of your financial plan that must be understood to help you stop leaking cash, stop leaving your assets exposed, and maximize the results of your hard work. If you are uncertain or don't like the answers to these questions, it's time to find help so that you can create the certainty that will serve you both now and in the future.
Garrett B. Gunderson is a financial advocate to chiropractors and engages a Vitalistic financial philosophy to assist Docs in creating sustainable wealth. He wrote the NY Times bestselling book Killing Sacred Cows. Get a signed, hardcover copy of yours on behalf of ChiroTouch by clicking here.