Where Many Financial Consultants Miss the Boat

One of my favorite phrases is “fortune cookie wisdom”, which is just saying that people, in the context of money, really only care to talk about the superficial things and give superficial advice.

As someone who has had demonstrable money problems, I can tell you that when someone says “Hey make sure you’re saving 10% of your paycheck” or “Start that 401K” it means nothing when you’re struggling to keep up four walls and the lights on, right?

Much of what I read in the personal finance section is centered on fortune cookie wisdom. We tell people to pay themselves first but we don’t teach them how to structure their budget to do that. We just assume they will figure it out. We tell people to invest 10% into stocks or bonds but we don’t tell them which ones, what to look for, and how to tell a good investment from a bad one.

I think it’s important to not gloss over the basics. Basketball is representative of this, surprisingly. When you’re in crunch time and you need a big play, it’s the basics that win you the game. The turn around hook shot 3-ball isn’t going to win you the game. It’s the bounce pass that sparks good ball movement and a layup that gets it done.

When we look at our finances, if we have no good foundation then we will surely crumble in crunch time. What does a good foundation look like? That’s what I call Phase 1 of our 9 Moves program.

Move #1: Investigate your finances

Look at your finances in their entirety. Understand your monthly gross and net. Look at what you’re spending every month and list out the averages. Look at your debt, how much do you owe? What’s the APR? What’s the minimum payment? A detailed investigation of your finances is needed to progress with any meaning.

Move #2: Build a Budget

Are you rocking a lean budget? 70% of adults don’t. Your budget is your gateway to success. This is where you plan and strategize for the long-term. If you don’t have a budget, money is going to come in and go out and you won’t know where it went. Look at Mint or EveryDollar as they are two good free options.

Move #3: Save 5% of your Annual Net

How much do you net per year? You’ll know that based on the information in Move #1. Take your annual net at multiply it by 0.05, round to the nearest $100 and that will be your preliminary savings goal. Why 5%? Well, everyone has a different lifestyle and if everyone is doing 5%, it’s proportional based on their income which translates into lifestyle. If you net $50K per year, you’ll want to have a savings goal of $2,500.

As you can see, we haven’t even talked about investing yet as you need to strengthen that foundation first. Don’t neglect the basics or the fundamentals as we call them. That is what you’re going to fall back on when you’re in a pinch. If they aren’t there, you’ll wind up with a loss.

Bounce pass first. That’s where success begins.