Make a plan
The first step in avoiding financial mismanagement is setting clear financial goals. Without a well-defined plan, you may be endlessly chasing "more," constantly moving the goalpost and never reaching satisfaction or contentment.
As financial guru Sue Orman said in an issue of O Magazine, “A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.” That’s the benefit of a plan. You give yourself clarity and security.
To be clear, having a plan doesn’t mean simply earning as much as possible. It means determining what you want to achieve and what resources you genuinely need. By clarifying these objectives, you can work toward clear and tangible goals so that you’ll actually feel secure once you meet them.
Advisor.com is an ideal resource for building a tailored financial plan.
They can connect you with advisors who specialize in helping you set achievable goals, establish a clear investment strategy, and ensure that your retirement is as secure as possible.
With Advisor.com, you gain access to expert guidance that helps keep your financial plan on track and aligned with your long-term vision. You can set up an initial meeting free of charge with no obligation to hire with your match.
Invest in the right places
Spending money on a lavish lifestyle may sound appealing to some, but investing your money for the long term will make that joyride last much longer.
Pacino rented the same property for two decades, pouring out, as he said, “a ridiculous amount of money to rent some big fancy house in Beverly Hills.” He criticized his accountant for not raising this financial mistake with him, as he believed that money would have been put to better use elsewhere.
For instance, if Pacino made a $20,000 investment at age 30 and didn’t touch it while it grew at an annual interest rate of 7%, it would be worth approximately $213,532 by the time he turned 65. If he made that same investment at 40, it would be worth practically half of that, or $108,549, at 65 years old.
That’s why you might want to start investing as early as you can. It’s less about how much you invest and much more to do with when you ultimately start.
Once you have enough cash stowed away for a rainy day, you can consider investing in higher-risk assets, which will hopefully bear a higher reward, too.
For instance, with Fundrise you get access to an expansive portfolio of alternative investment opportunities spanning real estate, private debt and venture capital. With over two million investors and managing over $7 billion in real estate assets alone, Fundrise is an accessible way to diversify your portfolio with the potential of yielding dividends every quarter.
To get started, all you have to do is share some details about your personal and financial background, along with your investment preference, and Fundrise will recommend a portfolio aligned with your goals.
Stick to the plan
Once you’ve set a plan and you’re investing in alignment with it, commitment is essential. “Lifestyle creep” is one of the biggest threats to your financial security as your wealth accumulates. It’s the tendency to gradually spend more money as your income increases, often without realizing it. It’s also a notion that Orman commented on, saying in a blog in October, “We’re all susceptible to lifestyle creep.”
That very notion is a likely culprit behind Pacino ultimately going broke and losing “all his money.” But it’s an incredibly common phenomenon that can easily hit any American.
Protecting the wealth you accumulate requires discipline and mindfulness. With Arta Finance, you get access to a digital wealth management service with exclusive financial strategies for public market and alternative investments. These include private equity, quantitative strategies, and venture capital investment opportunities. You can think of them as an accessible family office, allowing you to tap into innovative financial solutions that empower you to take control of their financial future.
Simplify your finances
In his memoir, Pacino expressed that from early on in his career, he simply didn’t understand how money worked. “It was a language I just didn’t speak,” he admitted.
And he’s certainly not alone in that sentiment. If your finances are scattered across multiple accounts for saving, investing, lending, and spending, it’s easy to get confused by it all. With the myriad of tools and technologies now on the market, your money can quickly feel like a foreign language that you can’t comprehend. According to a survey by GuideVine, 55% of Americans feel lost when it comes to their long-term financial planning.
It doesn’t need to be that way. Empower gives you a complete view of your net worth in one centralized place. You simply link your credit cards, mortgage, loans, and your investing, retirement, and bank accounts, and Empower's net worth tracker does the rest.
This tool allows you to consolidate all of your accounts in one place so you can measure your progress over time. Seeing firsthand how your accounts look can help you pivot your budget to focus on your goals and improve your net worth.
With all of your accounts linked, Empower can also organize budgets for you, provide a retirement plan, and monitor your cash flow.
Another way to consolidate your finances is with Vanguard — an investment management company. They offer hybrid advisory services to help you reach your unique financial goals. Their hybrid advisory system combines advice from professional advisers and automated portfolio management to make sure your investments are on track to achieve your financial goals.
All you have to do is fill out a brief questionnaire about your financial goals, and Vanguard’s advisors will help you set a tailored plan and stick to it.
Once you’re set, you can sit back as Vanguard’s team manages your portfolio. Because they’re fiduciaries, they don’t earn commissions, so you can trust that the advice you’re getting is unbiased and right for you.
