How Much is Enough? 7 Steps to Financial Literacy

There are two big goals that have eluded me for much of my life.  The first:  losing those last ten pounds.  The second:  getting a handle on our finances.  I’m not speaking here simply about trying to make enough money to last us all of our lives.  But the even more critical—and often overlooked—part of the equation:  Getting clear on what “enough” is?  Exactly how much do we need to make, for how long?  How much do and can we spend?  And how much do our investments need to be earning, as well, and how do we factor in risk?  In other words, how do I become financially literate about my own life?

When it comes to finances, particularly in the context of retirement questions, most of the Boomers I know go fuzzy-headed.  (There are legitimate reasons, but I’ll have to save that for another blog.)  In any case, here’s how one Boomer pushed through her resistance and confusion to get some degree of control over her financial future.

1. I read six books about finance, budgeting, economics, retirement and Social Security.  I got familiar with the terminology as well as the pro and con arguments so that when the time was ripe, I could speak with my financial advisor intelligently.
2. Ialso started studying the financial news on television, in newspapers and online newsletters from experts, in order to take what I was learning from the books and test the knowledge against current financial conditions.
3. I found an on-line budget tool and did the hard work of figuring out how much we actually spend by keeping track on a daily basis.  That’s right.  Getting a handle on how long your money will last is based on the knowledge of how much you actually spend.   Most Boomers, it turns out, radically underestimate not only how much they spend now, but how much they will be spending once they retire.
4. I organized our investments.  You know all those envelopes that arrive from your old 40lk plans?  I actually opened and read them.
5. This was the point that I realized that if I were to do a competent job not only getting the answers to every question, but staying current for the rest of my life, that was going to be a full-time job in itself.  Unless I was willing to give up everything else in order to become the equivalent of a financial industry executive, myself, I was going to have to find someone I could trust.
6. I Googled advisers online, talked to friends, visited websites and ended up interviewing five advisers, ranging from institutional representatives to fee-only independents.  I made my final selection on the basis of his willingness to take my questions, suggestions and boundaries regarding financial decisions respectfully.  I was looking for a partnership, and so far, I think I got the right guy.
7. Because I had good numbers for him to input, plus had all the pertinent details about our investments—and because I was educated enough to have him project into the future based on realistic earnings, not pipe-dreams—I trust that I now have a solid handle on how long we need to work, how much we can spend, and what we need to do with our investments.

I never thought I’d be able to say this:  but even if it won’t be as cushy a retirement as I once dreamed, I can at least feel I’ve got as much of a handle about the future as humanly possible.

Now, if only I could lose those last ten pounds…