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What First? Making Financial Decisions in the Right Order

What First? Making Financial Decisions in the Right Order

January 11, 2018

When you get dressed, do you put your pants on first and your underwear on next? Do you put your shoes on before your socks? I know this is a silly analogy but bear with me. If you don’t get dressed in the right order, you would look pretty ridiculous. It’s the same with your finances. If you don’t “get dressed” financially in the proper order, your finances may end up in a mess. Here’s a pattern to follow when making financial decisions:

1. Protect Your Todays Before Planning Your Tomorrows

Insurance is one of those things that we often don’t think about until it’s too late. We get the policies we think are a good deal, then forget about them. But not having the right insurance coverage could set you back financially if something unexpected were to happen.

Here’s an example. Eight years ago, I sat down with a client and we applied the four rules of financial decision making. As part of the first rule, I suggested he increase the deductibles on his auto and homeowners insurance and apply the savings in premium to a new umbrella policy. Fortunately, he took my advice, because a few years later his wife was in a terrible car accident that she was responsible for. In our review last week he told me that a claim was paid and if it wasn't for the umbrella policy his finances would have suffered a hit too major for any rate of return to recover. Insurance exists for a reason, so make sure you have the policies that are right for your situation so you don’t kick yourself down the road.

2. Become A World Class Saver

My golden rule is to save 15-20% of your gross income. There’s not a lot you can control when it comes to the markets and the rate of return your money will earn by the time you retire. But you can control the amount you contribute to your savings. The earlier you save and the more you save, the better retirement outlook you will have.

Here’s the math: if you start saving $400 per month at age 25, you would have $1 million saved by age 65 (assuming a 7% annual investment return). If you don’t start until age 35, you’ll have to save around twice as much to reach $1 million by age 65.   

3. Be Liquid

Did you know that 35% of Americans only have a couple hundred dollars accessible for a worst-case scenario? (1) Part of being a world class saver involves creating a liquid emergency fund, equal to one year’s worth of income. You don’t want all your savings tied up in retirement accounts that will penalize you if you withdraw the cash just because you need to pay a sudden home repair bill. You never know what life will throw at you, and if you don’t have easily accessible assets, a major expense could be a blow to your future retirement.

4. Eliminate Consumer Debt

One of the worst case scenarios is to start your retirement with debt piled up. Instead of all your hard-earned savings going towards living expenses and bucket list goals, it’ll be tied up paying off credit card or loan debt with high interest rates. Start chipping away at that debt now so you can have incredible freedom and peace in your financial life.

Ready To Make Some Good Decisions?

Whether it’s been years since you created a financial plan or you are just getting started now, it’s the perfect time to make sure you are getting dressed in the right order to set yourself up for the strongest financial future possible. If you want help taking these four simple steps, check out our Financial Scoreboard and email me or click here to schedule your complimentary introductory phone call.

About Carl

Since 1999, Carl Lutz has served more than 400 families and business owners in the area of building and protecting wealth. Today he spends much of his time helping pre-retirees transition from accumulation to distribution, in conjunction with serving business owners in the areas of estate and succession planning. Along with nearly two decades of experience, he has received the "Advanced Financial Planning" designation, the Chartered Financial Consultant® (ChFC®), signifying his comprehensive and in-depth knowledge of financial services. To learn more about Carl, visit or connect with him on LinkedIn.

Carl Lutz is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 600 DELAWARE AVENUE, BUFFALO, NY 14202, 716-817-7109.  Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Lutz & Associates is not an affiliate or subsidiary of PAS or Guardian. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

This material was prepared by an independent third party.