Taking Stock

Since reaching the milestone of being debt free last year, my husband and I have been in a state of limbo. Right before paying off the last of our debt, we were one synchronized team, attacking a mutual goal with an unrelenting fervor. After that final payment, sure, we felt good, but we were left asking ourselves, “now what?” And quite truthfully, we had different opinions about where to go from there.

For example, I really wanted to use a financial planner. One that I trusted, that wouldn’t try to sell me products just to make commissions, one that would help with the planning aspect of our journey and would help establish our investment and saving goals, educate us, and would guide us through tax issues. I had someone all lined up.  We even had her come to the house and answer our questions about her services.  While my husband was willing to listen and be polite, he went into the meeting with the preconceived notion that there was really no way that we would end the meeting with him wanting to hire the financial planner.  You see, he had done some reading. Particularly, Bogleheads Guide to InvestingHe also listened to a lot of Dave Ramsey.  A lot of Dave Ramsey.

These advisors pointed out that financial planners cost money. And they emphasized that the amount of money that you will spend on the financial planner, even if it is only a small amount, could ultimately cost you hundreds of thousands of dollars due to not being able to invest that money and letting compound interest do its work.  This is a hard point to argue against.

While going through this process, what I realized was that we kept confusing an investment plan with a financial plan. Our financial plan was already taking form.  We would no longer take on debt, we would live conservatively, we would continue to decreasing our monthly expenses and work on maximizing our savings.  We also had definite retirement goals (dreams, really).

So, as outlined above, my husband and I already agreed on the financial plan.  However, it was the investment plan that confused and frustrated us.  We had no idea what to do with the money we were saving.  In the end I agreed to allow my husband to act as our investment planner. Does he have a degree in business, accounting, economics, finance, or any other business or investment related sector? No.  It’s in English, actually.  But, he’s a smart man (except when it comes to finding something). And, well, I do have a degree in economics, so I figured we could figure this out together.  He was willing to do the research.  I was willing to trust him (and cross check his data).

I am going to admit, though, that one of the biggest reasons that I was willing to have us muddle through our own investment plan was that the plan was not going to be complex. Very basically, our plan is to focus on very low-cost indexed funds with moderate risk, such as one would find with Vanguard or Fidelity. In fact, we ended up buying a fund of funds.  While a traditional indexed fund is already diversified in stocks, a fund of funds is diversified in stocks and bonds.  So we don’t have to worry too much about whether to buy municipal bonds, high yield bonds, junk bonds, or U.S. bonds.  We are not looking for the next get-rich investment.  We are not looking to discover something new that we need to invest in now, before the opportunity passes.  We are just looking for a good, somewhat safe place to grow our money with low costs.

This does not mean that we do not have  a lot of questions and many moments of indecision.  We do.  Fortunately, in this day and age, the internet provides a lot of really good information, as long as we can sort through what is genuine advice and propaganda.  And we have discovered that we are much more intelligent about investing than every day before.  While new questions continue to pop up, we continue to learn the answers.  Obviously investing can get incredibly complex, and, honestly, our investment plan is slightly more complex than outlined above.  As we understand more, the types of investment practices we can conquer expands.

I am glad we took this route.  Had we gotten a financial planner, we would not have been forced to learn all that we have.  We would have relied on someone else to tell us what we should be doing and we would not have understood half of it. Now we are taking control of our own (future) financial independence.

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