4 Tips for Achieving Long-Term Financial Success

4 Tips for Achieving Long-Term Financial Success

As I was working on a client’s financial plan today, I thought one of the recommendations might be helpful for others. Here is the redacted text that made up one recommendation in the cash flow and budgeting section of a client’s financial plan: Our final recommendation vis-à-vis your cash flow and budget is the hardest to implement and the hardest for us to recommend. Successful financial planning ultimately comes down to cash flow planning. Over the years, our most successful clients have developed financial habits that allow them to live below their means. Living below one’s means can mean different things to different people, but it essentially comes down to a lifestyle decision whereby one embraces frugality and eschews the temptation to spend at one’s income level. Given various societal pressures, such habits are incredibly difficult to adopt. Some best practices to aid you in developing these habits are as follows:   Live on a set salary. For example, you could consider setting up your household budget so that you only live on your base salary, and you work toward saving all of your additional household income.  As income increases, avoid the temptation to commensurately increase your standard of living. Save heavily and regularly. One strategy here is to save raises and salary adjustments, and to continue living at your previous income level. Save 20% of gross income, and maintain this savings rate as your income increases over time. One mistake people make is that they often max out retirement plans and think they’re saving enough. However, if maxing out a retirement plan only results in a 10% savings...
7 Things to Consider before Improving Your Rental Property

7 Things to Consider before Improving Your Rental Property

In the context of comprehensive financial planning, our clients often want to know if it makes sense for them to improve their rental property. This is a really good question, and we think there at least 7 things to consider before making such decisions: Obtain comparisons. Before making improvements, it makes sense to obtain comparisons from other rental units that have similar upgrades so that you can find out how much more you might be able to obtain in rent for making improvements. These comparisons can be obtained on Craigslist and other rental websites. Get local advice. Have a local real estate professional who is familiar with the area come take a look at your property and provide you with her/his perspective on what improvements/repairs might result in higher rents. A local professional is often very familiar with surrounding properties and can be an invaluable resource. If the agent thinks there’s a possibility of gaining you as a client at some point, then you can often obtain their feedback at no cost. Be careful not to make upgrades that your local market won’t support. Some people make the mistake, for example, of making high-end improvements in a rental market where those improvements won’t increase their ability to obtain higher rents or increase the value of the property. Personal knowledge and judgment is paramount here; some landlords maintain a strategy whereby they aim to keep repairs and improvements to a minimum, and they’re still able to attract enough in rents to make a profit. Others landlords, however, need to make improvements in order to get their rents to a place of profitability....