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4 Important Questions You Should Ask About Personal Finance

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It’s long been the impression that the most important question you can ask in your financial journey is “Where should I invest my money?” And yes, this is an important question. After all, smart investments can mean the difference between financial success and failure. But what about the questions that must come before that, the important questions about personal finance that play a key role in reaching – and protecting – your full financial potential?

The Wrong Question Can Lose the Race

Today, personal finance has almost become a rat race of sorts. We’re all out here scrambling for retirement, chasing an elusive number that we THINK we’re going to need to survive once our income stops. But what’s your number? How do you know what the cost of living will be 15, 20, 30 years down the road? How do you know what life changes you may face?

Here’s the ugly truth: No one, not financial advisor extraordinaire or your next door neighbor, knows the answer to this question.

We all fear the unknown. And retirement is one of the biggest unknowns we will ever face. So, we’ve become consumed with where to invest our money. Many investors chase returns, flip flopping their investment strategy based on the “next big thing,” and try to time the markets for when to get in and get out. Some investors have become so fearful of the market that they pull out at the slightest sign of volatility.

We’re obsessed with asking “Where should I invest my money?” It’s the first and the last thing on our mind throughout our financial journey.

But when you make an investment decision, it’s more than just putting your money in a portfolio. This is one of the most complex decisions you will make; it has tax implications, estate planning implications and liquidity implications, just to name a few.

Four Questions You Should Ask About Personal Finance

Making one investment decision sends a ripple through your entire financial life. This is why it’s essential to address that ripple effect before asking where your money should be invested.

Here are four important questions that you should ask about personal finance when making an investment decision:

1. How is the account titled? The way in which your account is crucial. Having the wrong title can mean negative consequences for the health of your estate. For example, say you’re opening a joint investment account with your spouse. If you title the account as Joint Tenants With Rights of Survivorship, it means that you each own 50% of the asset. Ideal, but it also lacks in credit protection since they can go after assets in your name – i.e. 50% of your joint investment account. If you title the account as Joint Tenants by Entirety, you each own 100% of the asset. This offers a much higher level of credit protection, as the asset is owned in both of your names. Creditors can’t go after those assets. How is your account titled? A simple, but powerful question.

2. What are the tax implications? If you’re investing in a qualified account, this is pretty cut and dry. You’ll either pay tax on the money now, or tax on the money when you pull it out. But when it comes to unqualified accounts, investors often forget the importance of tax management. In a recent study by U.S. Trust, more than half of the high net worth investors surveyed said that minimizing the impact of taxes was more important than pursuing a higher return. Sure, you can get a 12% return, but what’s that investment costing you in tax? After all, your net pay – how much you’re making in returns after taxes – is what counts. Poor tax management adds up over the long haul. It’s one of the easiest ways for investors to forfeit large portions of their annual gains.

3. Who will be the beneficiaries of your investment accounts? This brings us back to estate planning implications. Determining who your assets will pass to should something happen to you is key in personal finance. You have several ways of doing this, but for the sake of this article we will keep it simple. Every investment account will give you the opportunity to specifically stipulate your primary and contingent beneficiaries. Just be sure you update them regularly – your beneficiary information trumps what’s stated in your will. You can also set up a trust to hold your assets, titling your investment accounts accordingly. This offers maximum asset protection, and ensures that your assets will be passed on according to your specific wishes.

4. Do you even have enough core liquidity to begin investing? In its simplest form, investing impacts your rainy day fund, your ability to save liquid dollars. It may not make that big of a difference at first, but several investment accounts later your dollar stretches less and less. Once you invest your money, it’s not meant to be touched – whether for retirement or not. It’s meant to be invested, to grow and produce a return. You have to have a place to turn to when life happens and you need money NOW. This is why it’s so critical to have at least six months of core liquidity built up before you start investing. If there’s one thing that I’ve learned in this business, it’s that life can and will happen. You have to be able to react effectively if and when it does, or you may end up risking your financial success.

Why Does it Matter to You?

The world of personal finance isn’t just about picking the right investments. It’s about building a foundation centered on one goal: Protecting your life’s work. Our financial lives are so much more complex than where we put our money. That’s just one decision that affects several areas of our financial life. When you only ask one question, you fail to evaluate the critical factors that can impact your financial success.

Reaching your full financial potential requires more than chasing investment returns. You have to continually optimize and protect your complete financial position, giving yourself the ability to effectively react to whatever life may throw at you.

7 Things Wealthy Investors do With Their Money – that you should consider too

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We can learn a lot from watching how the wealthy handle their money.

Perhaps that’s why there has been so much “noise” created in the industry, though. Everyone wants to know what the secret is to successful investing. We want to know the secret to creating sustainable wealth. And there are plenty of talking heads who claim that they’ve found it.

But when it comes down to it, there isn’t a lot of variation in how the ultra-wealthy seek to keep their dollars growing. In fact, they have a lot more in common in how they manage their money in comparison to what they don’t do. Take Warren Buffet for example, he’s stuck to many of the same investing principals for decades. And who wouldn’t kill for the chance to spend 24 hours in a room with Warren Buffet learning his “age old” investing habits?

7 Things Wealthy Investors do With Their Money – that you should consider too

U.S. Trust completed a recent survey of nearly 700 high net worth investors (those with investible assets of at least $3 million) that explored these commonalities. Here are seven key findings from the survey that a majority of high net worth investors do with their money that you may want to consider doing too:

1. They understand the importance of liquidity. Some may see keeping substantial amounts of cash on hand as being too conservative or having a fear of the market. A high net worth investor would be quick to tell you otherwise. More than half of these investors keep their liquidity high so that they are in a position to act quickly when great opportunities present themselves. Not only do they make sure that they have access to cash before they need it by forming healthy savings habits, but they also make sure they have access to multiple sources of liquidity.

2. Large cash positions are commonly found in their portfolios. To add to our above point, nearly 6 in 10 high net worth investors have at least 10% of their portfolio in cash. Remember that for these investors, this isn’t sign of ultra-conservatism. It’s a sign of their desire to capitalize on the right opportunities at a moment’s notice. This serves as another source of liquidity, allowing their cash on hand to flow opportunistically.

3. Their investment philosophy is geared toward the long-term. Six in 10 high net worth investors seek well-balanced, risk-managed growth. Even if it means lower returns, it was still more important for them to lower the risk of their investments. The wealthy keep their focus on funding long-term goals, while keeping near-term opportunities in mind as they go. A vast majority (83%) have made their investment gains through a long-term buy and hold strategy. Take it straight from Warren Buffet, who has said time and again that money is made in investments by investing, and by owning good companies for long periods of time. This disciplined approach to investing helps the wealthy minimize their emotions and tune out market noise.

4. They make tax-conscious investment choices. More than half of high net worth investors say that it’s more important to minimize the impact of taxes when making investment decisions. Even more important than pursuing higher returns regardless of the tax consequences. This can be attributed to the point that really counts is your net pay – how much you are really making in returns after taxes. Poor tax management will add up over the long haul, and can easily cause you to sacrifice large portions of your gains for the year.

5. They invest in tangible assets. Almost half of high net worth investors own some sort of tangible asset, such as a real estate investment. These assets can produce income for the investor, and grow in value over time. While choosing what to include in your portfolio aside from stocks and bonds should be an individualized decision, there is no doubt that the wealthy understand how tangible assets can be a key element for a well-rounded portfolio.

6. Many know how to use credit as a wealth building strategy. Nearly 65% of high net worth investors agree that credit is a strategic way to build wealth. While 8 in 10 say that they know how to use credit to their financial advantage, it’s worth noting that this strategy does come with some risks. Credit can be costly. But there are small ways that you can accomplish this as well, such as using a credit card with rewards for spending you would be doing anyways. Instead of racing to pay down fixed, low-interest loans (mortgages, student loans, etc.) consider paying them down on schedule and saving or investing the extra money.

7. Their interest in impact investing is growing. This is the practice of investing into companies and organizations with the intention to generate a beneficial social or environmental impact alongside a financial return. Over the past year, the percentage of high net worth investors who own impact investments has tripled. Of those investors surveyed, 11% currently own impact-focused investments in their portfolio. Almost half of these investors believe companies that adhere to good social and environmental practices are less risky. Not only that, but they want to invest in a positive social impact and support issues they strongly care about.

The 10 Simplest Ways to Make People Like You

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The majority of people would say that they are likeable. I myself would say the same.

The difference is whether or not people would call themselves charismatic. Whether or not they would say they have that spark that can automatically enchant anyone they come in contact with.

Charisma: Born With or Learned?

Take Gary Vaynerchuk for example. He grew his family’s wine business from a $3 million business to a $60 million business in just five years. He now runs VaynerMedia, a prominent digital agency that day trades attention and builds businesses – Gary’s own personal mantra. Hundreds of thousands of people tune in every week to watch the AskGaryVee Show. Thousands of people also watch his DailyVee show, where he uses a handheld camera to record what he does on a daily basis. He’s booked at speaking events for major corporations and events almost weekly. And they pay big bucks for him. That’s charisma.

Imagine being able to have that kind of effect on people – to be able to sell your way to a $60 million business, or to be fascinating enough that people take time out of their day to watch what you’re doing with yours.

How much more successful could we all be, both personally and professionally, if we all came hard wired as “charismatic?”

So, are you simply born with charisma or can anyone be taught the art of lighting up a room? The word itself comes from the Greek meaning for “gift,” which would imply that one must be born with it. But, isn’t charisma also the difference between Marilyn Monroe and Norma Jean Baker? Isn’t it the difference between Lady Gaga and Stefani Joanne Germanotta? Lady Gaga sells out Madison Square Garden, influences the behavior of her massive fan network and has captivated the loyalty of millions. Marilyn Monroe possessed similar qualities during her career.

But if Stefani Germanotta or Norma Baker walked into a room, would heads even turn? Comparing a person’s alter ego (i.e. Lady Gaga) to their given identity (i.e. Stefani Germanotta) suggests that charisma isn’t always something you’re born with. It can be taught.

The 10 Simplest Ways to Make People Like You

What’s the secret? Do charismatic people have skills that the rest of us “ordinary” people can learn? Definitely!

Here are 10 ways that you can become more charismatic, and are the simplest ways to make people like you. (Credit to Robert Cialdini, who identified some of these in his book, Influence: The Psychology of Persuasion.)

1.People tend to do business with people they genuinely like. Behave in a way that makes you likeable to others. Give people your full attention. Have a positive attitude. Be polite and patient.

2. People value other people who can keep their word. If you make a promise, follow through on it. Make sure you do it by the promised deadline, if not sooner.

3. People trust people who truly demonstrate they have their best interests at heart. This pivotal shift happens when you give advice that benefits them as much as, or even more than, it benefits you.

4. People want to work with people who are experts in their field. So, become one. Practice, train, educate yourself, research trends and never quit studying the experts around. As you build your expertise, share it with your audience. Making your knowledge available to others validates your status as an expert.

5. People like people who are vulnerable. There is a fine line between charismatic and intimidating. Even the most charismatic humans are still that, human. Encourage a human connection with others by showing that you’re not always perfect. Admit your shortcomings.

6. People want to give their money to people who are “real” and honest. You must truly believe that always being truthful is more important and powerful than lying. Not matter what the circumstances may be.

7. People respond best to people who are great listeners. There’s an old saying that sums this up perfectly: You were given two ears and one mouth for a reason. Listen twice as much as you talk.

8. People feel comfortable around people who are similar to them. Always try to identify what you have in common with other people. Use these commonalities to prosper a connection.

9. People like people who are humble. Don’t brag about your successes. Mention them when necessary, but when someone brings them up, quickly move along and switch the topic back to the other person.

10. People want to be include helpful people in their network. We want to be around people who make our lives easier. Make it a personal standard to tend to the needs of others, even when your purpose may be to help yourself.

Did you find that you already possess several of these ingredients for charisma? Good. Now practice and refine them even more. Which ones do you still need to work on? Find the drive to work on them every chance you get, no matter how casual the conversation or interaction is.