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Aventura Financial Questions – Where’s the gold?

November 30th, 2012 · No Comments

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Life in South Florida can be filled with so much enjoyment and fun in the sun, but sometimes it’s good to take a moment to think about important life issues. Finance is one of those topics that can be stressful and easily ignored in good times. This segment by Louis Berlin is a quick glimpse into understanding your finances and steps to take to get a full picture. This is a short excerpt from his book, The Financial Fitness Handbook.

Understanding your finances—Rule # 1:

Finances are predictable. The steps you take now have a high degree of certainty in shaping what will happen later. Yes, some people will win the lottery, or inherit a windfall. But most of us won’t. With finances, very little happens by chance.

The financial world is logical, predictable, and foreseeable. Which means you can make plans, and cause desirable outcomes.

But first, you have to commit to following RULE #1.

RULE #1: Understand your financial situation—know the answers to the following 8 questions. This is also known as the Financial Golden Rule: “Know Where the Gold Is!”

It is not good enough for your husband, wife, parent, or accountant to know your financial situation. You have to know. Mastering the subject matter of the lists in this book will get you to that goal. But before you start, you need to know the following:

1. What assets do you have?
2. Where are these assets?
3. What passwords do you need to access each? (It is not good enough to have them on a file in a computer. They need to be printed out, kept handy, and be coded so no one else can figure them out. More on how to do this later.)
4. Why do you own each asset? There has to be a reason it was purchased, and a reason you are holding onto it. (For instance: Asset—a 529 tax-free college fund. Reason purchased– to make sure there was money for college. Reason to keep–you are holding on to it because you will need money for college in 3 years, and it is performing well.)
5. What are your sources of income? Separate by earned (like salary) and passive (money that comes in when you work or not, like interest on a savings bond).
6. What are your expenses? How will they change in future years? You should be able to create a list of everything you spend in a year. You also need to be able to project how this will change in future years—add in money for unusual expenses that are anticipated. For retirement, add in the increased costs associated with aging poorly, such as some money for long term care. When making this list, focus on what you spend money on, not how you pay for it. Credit cards are not a category of spending—food, clothing, personal care, entertainment are, even if you charge them. This is not as difficult as it sounds. Itemize everything you spend. Keep track of what you spend cash on.
7. What are your liabilities? What do you owe, to whom, how much, what are the payments, and what are the interest rates?
8. Know what is coming in down the road. Will you be inheriting any money in the future? Will you be inheriting any unfunded responsibilities? Is there anyone you will be responsible for taking care of in the future? As uncomfortable as it may be, you need to sit down with your parents periodically to review their financial situation. Vague promises that there will be something coming to you are not useful for planning.

By the way, if you think you can ignore The Golden Rule, you might as well stop reading now. No one is going to be able to help you with your finances, no matter how much you pay them, unless you can draw a complete picture for yourself. And going out and buying financial products, like stocks, bonds, real estate, CD’s, insurance, etc., will just create a financial mess that may or may not be beneficial to you.

-Excerpted from: “The Financial Fitness Handbook: Making Your Money Outlast You (15 Checklists for Achieving Peace of Mind About Your Financial Future),” by Louis Berlin, C.E.O., Berlin Consulting Group. Download free of charge at

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