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The Problem With Traditional Financial Planning

Have you ever met with a financial planner?For example, $5,387,234.23.You will look at
If you haven't, you can expect to go throughthe plan and you will think, "My gosh, there
a certain process. You will be asked aboutis no way I can do this!" You may get started
your financial goals. One of your goals willdoing a few things that the planner
likely be that you want to plan forrecommends. But it won't last very long and
retirement.You will be asked about youryou'll go right back to doing things the way
present income. You know the answer to thatyou've always done them.So what's wrong with
one. You will be asked about your expenses.the traditional financial planning process?
That one will be tough. EveryonePlenty! First of all, it's ridiculous to try
underestimates their expenses because most ofto look decades in the future to predict
us have no idea what we're really spendingwhat's going to be happening in your life. I
and what we're spending it on.You will bedon't know about you, but I don't know what's
asked about your assets -- what you own. Yougoing to happen tomorrow, much less decades
know what you own, but it will be tough tofrom  now.
put a market value on some of it. You will be
asked about your liabilities -- what you owe.Also, traditional financial planning doesn't
For most people, facing the reality of theirtake into account what financial freedom
debts is rather daunting.You will be askedactually is. You're financially free when
when you want to retire. I would say theyour passive income (money you don't have to
average age most people give is 55 years old.work for) equals your expenses.So if you have
I don't know why that is, but 55 seems to beno passive income right now and your expenses
a popular number. Then the financial plannerare $50,000 a year, and you can get a 10%
will tell you that you will need toreturn on your investments, you need to
accumulate enough money to live another 40 oraccumulate $500,000 to become financially
45 years after retirement. After all, if youfree.
live to 90 or 95 you don't want to run out of
money, do you?You will also be asked aboutIf you can get a higher return on your
your risk tolerance so that the planner canmoney, you can reduce the amount that must be
determine what kind of annual rate of returnaccumulated. If you settle for a lesser
to factor in for your investments. If you sayreturn because you're risk averse, you will
you have a low risk tolerance, the plannerneed to accumulate more. You should also
will consider low-risk investments that willconsider inflation. Of course, if you invest
give you a lower rate of return. If you sayfor inflation, it will already be factored
you have a high risk tolerance, investmentsinto your investments.Understanding financial
that could provide a higher rate of returnfreedom as the point where your passive
will be considered. You can't have it bothincome equals your expenses is a much more
ways. If you don't take risks, you can't getrealistic way to look at it. Most people who
a very high rate of return on yourare committed to being financially free can
investments.Then all that information will beachieve their goal in a matter of a few
dumped into a financial planning softwareyears, not decades.Copyright 2005Larry Holmes
program. The software will print out a planinvites  you  to  visit
that will say you need to accumulate several
million dollars by the time you're 55 yearsYour common sense guide for financial and
old. Oh, and it will be exact to the penny.investment success.



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