One of the biggest problems that people will face as they age is outliving their money. Making sure that you understand why this will happen is important in planning for your future.
“A good financial plan will make sure all the unknown variables are taken into consideration.”
There are a few major problems that you will want to avoid when planning for your financial future and having a good understanding of them is critical to living a life of joy in your retirement years.
Here we will give you the terms for you to look them up and learn how they will impact your future. We will give you a brief understanding of the terms which will enable you to better your search.
These are what to look out for:
- Inflation– this is a problem that plagues everyone with the only way to off set it is to have an inflation proof account that rises with inflation. Many pensions or IRA-401k don’t grow based on inflation. Most bank accounts will not grow as inflation grows, so you must have a way to get your wealth to rise equal to or better than inflation.
- Lost Opportunity Cost– this is a term that pinpoints the actual loss that is incurred based on spending or buying. So when you spend money and get nothing in return you create a loss. Against that loss what could you have earned if you had put that money in the bank. The loss of interest growth is the lost opportunity that you incurred on the money.
- Planned Obsolescence– another term is products designed to break down and be replaced. For example, the last thing you want in your retirement years is to have to repair or replace your new roof. Any time you incur an expensive replacement item which causes you to spend money out of your fixed income you create a planned obsolescence cost. Dove tail this with Lost Opportunity Cost and voila you just hit the mother load of losses.
All of the above cost can be offset with a good financial expert but you will want to make sure they understand the Leap process first. These financial professionals are educated to understand the macro economic picture of your wealth.