"Prior Proper Planning Prevents Poor Performance"

By Mike Brady, Michael Brady & Co. Wealth Management

Many craftsmen have heard the statement, “prior proper planning prevents poor performance” countless times in their training. It goes along with, “measure twice, cut once” and is just as appropriate in personal financial planning.

With proper planning, you minimize costly mistakes and avoid panic when temporary disasters strike. There are small disasters such as car or home repairs, to large disasters such as the disability of a wage-earning family member. There are temporary disasters such as market declines and permanent disasters such as death of a loved one. Proper financial planning can help to reduce the effects of these disasters and speed recovery.

Here are a few steps you can take in this New Year to prepare your family for future disasters:  

• Pay off your high-interest loans and credit cards and pay them in full each month.  There’s no sense keeping cash in savings accounts when they earn less than your loan interest payments.
• Build a cash cushion in a money market account to pay for unanticipated expenses should the need arise—so you don’t have to run up those high-interest credit cards again.
• Have protection against early death or disability. Inexpensive term life insurance and disability coverage can protect you from loss of income.  
• Prepare at least a simple will and a durable power of attorney to handle financial matters, and a living will and healthcare power of attorney to handle medical decisions. These documents can prevent major headaches and costs when these types of disasters occur.
• Have an accumulation plan for funding your “financial freedom.” Think of this money as a goose that lays golden eggs. The larger the goose, the more golden eggs. You can spend all the golden eggs each year and never eat the goose. To never eat the goose, the number of golden eggs must increase each year to keep pace with the rising cost of living. Therefore, you should have a “financial freedom” income and spending plan for golden eggs. Proper prior planning can help to optimize the growth of the goose and the production of the eggs.

Michael Brady is a fee-only, full-time fiduciary and certified financial planner here to help with your prior planning. To set up an appointment, call 440-235-2100, email Mike@MichaelBradyCo.com, or visit MichaelBradyCo.com.