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Your Three-Legged “Financial Stool”
There are three elements of financial planning regarding planning for retirement or just being smart about your money. I call them the three “legs” of your “financial stool”. Those “legs” are: (1) investments, (2) tax planning, and (3) debt management.
It’s interesting, though, that most people are usually focused on only one “leg” of the stool: investments!
Most people have been “conditioned” to chase high returns. Why? Because that’s what we read about in the newspapers, hear about on the radio, get told about on the television/cable/satellite news, and financial programs. And that’s one of the “hot” topics at work, right? My stock/mutual fund/exchange traded fund beat the pants off of whatever you’re investing in! It makes you feel good. It makes you feel you’re doing better and are maybe smarter than the next person, right? Right.
But wait. What about the other two “legs” of your “financial stool”? What about tax planning and debt management? Well, most people usually look at me, when I ask them that, and simply reply, “what about it?”
Forgive me because I know that what I’m about to say is likely going to shock you, but tax planning and debt management for most of us is at least as important, if not more so, than investment returns!
Are you surprised I’m saying that? Well, let’s take a look. Most people are paying 25% - 45% in Federal and State taxes. While people with credit card debt are likely paying 12% - 30% or even more on unpaid balances.
So, why are most people chasing those illusive big returns, those big “winners” when they would likely be much better off to earn good returns while reducing their taxes and bad debt (debt that’s not deductible). Doesn’t that make sense?
This is no different than having a pitcher that you’re trying to fill with water (investment earnings) that has two big holes (taxes and debt) in it where the rate of watering coming in can’t keep up with the water running out of the two holes. The rate of outgo exceeds the rate of income.
On the road to a great retirement or simply smart money management, you CAN do all three. And I’ll show you how no matter how long or short your road is.
More Free Advice from The Retirement Sage:
Early Retirement? Or Retire With More Money Than You Even Imagined?
The Save or Invest Dilemma
Your Three-Legged Financial Stool
The Arithmetic of Loss
How sturdy are all the legs of YOUR financial stool?
If you're not sure, contact The Retirement Sage today and get the expertise you need to start
your own retirement planning today.