I’d like to continue this video series on hope as an investment strategy and what we can learn from the Israelite’s leaving Egypt. We established how many people understandably focus on God intervening the splitting of the Red Sea, but ignore all the prep work the Hebrews did prior to leaving Egypt.
Similarly, as I often tell my clients, “Hope is not a strategy.” It’s imperative that all families take the proper steps to secure their own financial future before relying on divine intervention. These practical steps include:
Spend within your means: The foundation of any financial strategy, irrespective of level of wealth, is to spend within your means. This means spending less than you make, leaving funds over for a rainy day, and avoiding debt. The inability to abide by this rule will set you up for financial ruin and no miracle will be able to bail you out.
Emergency Fund: Once you are spending within your means, your first goal is to set aside funds in case of emergency. This extra pool of cash, which is typically 3-6 months’ worth of expenses, will help insulate your investments from an unexpected, large financial expense. That cash on hand can be used to pay for those financial inconveniences that tend to arise, instead of needing to liquidate other funds or, chas v’shalom, take out debt. This may include needing a new boiler, compressor, car repair, new roof, and various other possible items that tend to arise over the course of life. Not having an emergency fund can derail your finances very quickly.
And Saving for retirement: Retirement is around the corner. This is true whether you are just starting your career or at the tail end of it. If you procrastinate on setting aside funds for retirement, or consistently prioritize other aspects of life, not only will you miss out on years of compounding, but you may need to rely on others (i.e. your family) to support you when you are no longer able to work. That is quite the burden to put on others and a very precarious situation in which to find yourself. Do yourself and your family a favor and save 20% of your income throughout your career. Your future self and children will be grateful for this decision.
In my next video, I will share a few more items investors can do to increase their probability of success so they don’t need to just rely on getting lucky.