Gary Foreman is a former Certified Financial Planner (CFP) who currently writes
about family finances and edits
The Dollar Stretcher website
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Everyone
from songwriters to psychics to traffic engineers will tell you that
it's important to 'read the signs'. And they're right. Take driving
for instance. Traveling without signs would be difficult and
dangerous.
Our financial affairs are another
type of trip that requires watching signs. To help us avoid trouble
and make progress towards our goals. So let's take a look at some
common financial road signs.
The "Stop" Sign. Sometimes
the best thing you can do is to stop before you make a purchase.
And, just like when you're driving, you need to look around for
oncoming traffic before proceeding. Failure to stop can cause an
accident.
How can you identify the financial
stop sign? Look for it any time that there seems to be too much
traffic. If a decision is complicated, there's a lot of traffic. If
you're facing many financial decisions at once, there's a lot of
traffic. If you feel like you're being pushed, it's time to stop,
look around and only continue with your purchase after you're sure
it's safe.
The "School Zone" Sign.
There are some situations that require us to drive very cautiously.
There are financial situations like that, too. They require us to
slowly and calmly evaluate a situation. Like the school zone, we
need to be watching for the unexpected. Anytime that someone says
you 'must act now' you should see a 'school zone' sign in your mind.
And, just like with the school zone, failure to obey the sign can
cause an unexpected accident.
The "No Parking" Sign.
There are places in life that don't allow you to stop. Sometimes you
just have to keep going. For instance, you can't park on the
expressway. That happens with our finances, too. If you're
struggling to make your monthly payments you can't 'park' your
finances. You need to get behind the wheel and take control. It's
time to steer carefully and watch where you're going until you're
safely out of traffic.
The "Speed Limit" Sign.
Many people dream of making a lot of money quickly. That's why
lotteries are so popular. But those that try to get rich quickly
often end up crashing. Just like driving too fast. Sometimes you can
exceed the speed limit for awhile without a problem. But if you
crash, it's often pretty nasty.
The 'speed limit' sign isn't as easy
to spot as some of the others. Often it is just a feeling that
you're going too fast for the circumstances. For some reason women
seem more aware of financial speed limit signs.
The "Route Marker" Sign.
Major highways have signs that reassure us that we're on the right
highway for our destination. If we don't see the route sign for
awhile we're probably going the wrong way. This, too, is true in our
financial life. If you're saving for retirement you need to take a
look at your retirement plan statements. Make sure that you're
headed in the right direction.
The "Exit" Sign. Missing an
exit on the interstate is a real pain. Often it happens when you
haven't studied a map to check where to get off. And, once you've
missed your exit the only thing you can do is to backtrack.
Our financial life also has some
exits that we don't want to miss. If you're accumulating debt you
need to take the next exit. If you're beginning to suffer 'burn-out'
it's time to stop and visit a roadside diner to check your
destination. Some exits, like paying for college, are well marked
and easy to spot. Still, you need to prepare to make a safe move to
the exit ramp.
The "Merge" Sign. When you
see a 'merge' sign you know to watch out for traffic from two lanes
blending into one. We need to look around for cars coming our way.
And then speed up or slow down to avoid an accident.
That can also occur with our
finances. Changes in work, health, marriage or education status are
a sign that new situations are merging into our life. Hopefully
we're ready to handle the new events, but ready or not, we need to
evaluate them now and see what effect they will have on our
finances. And, once we've studied the situation, we may need to
speed up or slow down. That might mean changing our investments or
the amount that we routinely spend.
Can reading the signs prevent every
problem that you might face. No, unfortunately that's not possible.
But they sure can make the trip easier and less stressful!
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