The New Year is upon us and it provides an opportunity to review your financial situation and set new goals and objectives. If you have a financial plan, your first step is to evaluate your plan and make sure it is still right for you and your lifestyle. And if you haven’t established a plan, now is the time to do so.
An excellent place to start is to think about your financial potential. Many people never think about their potential in regards to their finances, but having that perspective allows a better understanding of what your possibilities are.
Everyone has the opportunity to earn a large amount of money over the course of their lifetime, despite how much they may be earning. A 30 year old makes $50,000 per year for the next 35 years, they will have earned $1,750,000. That certainly isn’t pocket change for most of us and doesn’t factor in future raises or other, higher paying opportunities. This begs the question; if we have the capability of earning this large sum of money over our working career, why do many people feel as if they are running on a hamster wheel when it comes to their financial lives? Obviously we’ve only looked at our earnings potential to this point and have not factored in paying taxes, feeding ourselves and providing a place to live, as well as all the other expenses that come along with the life we choose to live. We refer to these as wealth eroding factors because they erode our wealth potential and often times whatever is left does not amount to very much. However, once we know what our financial potential is and begin identifying the various wealth eroding factors in our financial world, we can begin to reduce or even eliminate some of those wealth eroding factors and recapture some of those dollars that were previously leaving our financial world.
In order to reach your maximum financial potential, consider these questions to help reduce and/or eliminate the wealth eroding factors in your financial world:
- How are you currently making financial decisions? Are they with different people? At different times and under different circumstances?
- Are you certain they are working as harmoniously as possible…or could they be working in opposition to one another?
- Have you taken inflation, taxes, technological changes, planned obsolescence, financial expenses, lost opportunity costs, interest rate declines, market fluctuations, legislative changes, etc. into account?
- Are there other issues that keep you from planning ahead?
- What are your hopes and dreams?
- What are your fears and concerns?
Seem overwhelming? Working with a financial professional that can help you mitigate these eroding factors is extremely valuable.
It is a very constructive and eye opening experience to calculate your financial potential. While it obviously isn’t going to be absolutely precise, it will give you a good idea what is possible for you. Simply take your current earnings and multiply that by the number of years you expect to work. Combining this knowledge, along with reducing and eliminating some of the wealth eroding factors will put you well on your way to reaching your maximum financial potential. As Confucius said, “the longest journey begins with a single step”…so to get 2018 off on the right foot, take the first step by thinking about your finances differently.