What Should I Do With My Money? It Depends…
| Paul Fain, CFP®
From the perspective of personal financial planning, the answer to many of life’s complexities is, “It depends.” Of course, we all prefer black and white answers to important questions. But “It depends” fails to give us any certainty of outcomes.
Here are some common financial planning scenarios that seek an answer:
Should I get out of the stock market before the election? It depends (do you have short-term spending needs? If yes, get that money out of the stock market).
Should I choose the retirement annuity (a pension) or a lump sum distribution? It depends (does the pension have an annual cost-of-living adjustment? Are you a spendthrift? Are you comfortable investing a lump sum?).
Should I take the pension with 100% survivorship income to my spouse? Or, the 50% survivorship income to my spouse? It depends (do you have adequate life insurance or other assets for your spouse?).
Should I reduce my stakes in Amazon or Apple? It depends (what is your tax exposure? Are you diversified?).
Should I buy gold or crypto-currencies? It depends (can you afford to speculate? Do you understand those markets?).
Can I increase my retirement income distributions from my portfolio? It depends (which is a greater priority, your current lifestyle or a future legacy to your heirs?).
How much should I save for my newborn’s future college expenses? It depends (are you aiming for Harvard or State U.? Do you want to help with costs or foot the entire college bill? Will you invest in an EE savings bond or a growth mutual fund?).
With mortgage rates so low, should we sell and move or remodel our current home? It depends (does your current home meet your family’s needs? Do you need more space? Can you afford a down payment and closing costs on a new loan? Can you afford a larger mortgage payment?).
In the bigger picture of your total financial plan, the typical household has multiple financial goals competing for finite financial resources. What are your priorities? Guess what? It depends. We often have to make difficult decisions about prioritizing family needs, home, health, education, career, etc.
Often our goals and priorities have to be modified based on current events or unexpected developments. We may need to save more, spend less, delay gratification, adjust our risks, or consult with experts. In other words, the factors that influence “It depends” can also shift. Personal financial planning is just that, personal.
Icon Fred Rogers said it best, “You are a very special person. There is only one like you in the whole world. There’s never been anyone exactly like you before, and there will never be again. Only you.”