“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abe Lincoln
This well-known quote by Abraham Lincoln isn’t directly about personal finance. It’s more about preparation, but I thought it was important to share nonetheless. With his axe sharpening metaphor, Lincoln is telling us that with proper preparation, in whatever we attempt to do, we are more likely to succeed. So how can we sharpen our personal finance axe by improving preparation?
- Make sure we have all necessary insurance coverage in place. It doesn’t matter how much you save, one catastrophic event can ruin everything.
- Have an emergency fund in place, anywhere from six to 12 months’ worth would be great.
- Have a plan to pay off all of your consumer debt, i.e. credit cards.
- Save at least the minimum amount necessary to get the full company match on an employer retirement plan, i.e. 401(k). At least 10% is a better goal.
- Meet a qualified attorney and have a basic estate plan drafted including a will, powers of attorney, and a living will.
Life happens. We can’t know the unknowable, and things will happen good and bad. Following Lincoln’s advice and being prepared will give us the best opportunity to succeed in achieving our financial goals.
If you haven’t recently reviewed your financial plan you should contact your CERTIFIED FINANCIAL PLANNER™ Practitioner.
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