• Steve Martin

Five MORE things that are more important than rate of return

The most common question I get as a financial planner is “What kind of rate of return can you get for me?”

This question implies that the most important thing to your financial future is the rate of return that you get. A good rate of return is important, but I believe that there are things that are even more important to your financial future than the rate of return you get on your investments.

In yesterday’s blog, I addressed five things that are more important to your financial future than rate of return. Today I will talk about five more things. This is based on a list originally created by Bert Whitehead.

Much is made of the rate of return we receive on our investments. But how important is the rate of return in the context of our overall financial life? Not as important as we might think. Here are my Top Ten Factors Affecting Our Financial Futures, beginning with the most important.

6 – The stability of your relationships. Studies have concluded that there is a correlation between strong interpersonal relationships and financial quality of life.

7 – Making the most of the investment in your house. For most people, their house is one of the most important “investments” they ever make. The tax benefits, the leveraged growth opportunities and the diversification a home provides should be well managed and carefully thought out.

8 – Living within your means. To me, his is one of the most important factors in your future financial success. Everyone should learn to live within their means and take on no “bad” debt. In addition to the financial health benefits of this, there are great mental health and peace-of-mind benefits.

9 – Bad habits and horrible mistakes. Bad investing habits like chasing returns and trying to time the market create poor results for those who practice them. Just remember: if it sounds too good to be true, it probably is.

10 – Protecting yourself from devastating risks. If you are doing everything else right, you can still be devastated by loss of job, significant health issues, untimely death, disabiltiy, liability or legal issues. It is important to protect yourself from these signifcant risks through good insurance programs and having the proper estate planning docuemnts in place.

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