Would you rather have weak hands or strong hands? Most people would answer strong hands. Why would I want hands that had issues functioning and were weak? I couldn’t open doors, or type or cook! This analogy has been used in the financial world as well. I’ve taken this metaphor in a different way and used it with financial well-being. Take a journey to see where you fall.
I think you may have already guessed that anyone with weak financial hands has planned poorly. Here are a couple of characteristics of someone with weak hands:
- Spend beyond capacity of income and assets
- Too much debt
- Not enough cash…when you need it
- Forced to sell assets at the wrong time to meet needs
- Inadequate insurance protection
- No plan
- No communication among financial stakeholders (i.e. family members)
- No confidence
If you have weak hands, you probably not aware of what you spend. Basic budget management is fundamental for success, reduces stress and has a domino effect on everything else going on in your life.
If you don’t know what you spend, you may take out too much debt, resulting in more payments, resulting in not having enough cash available, resulting in going further into debt, resulting in more stress! If you are low on cash because you spend beyond your pay, it could also result in you panicking and wanting to sell certain assets in your retirement accounts to meet your current needs, which could be detrimental on your account.
Why would anyone want to be in any of the situations above? The answer is no one does, but it’s the lack of effort and action that puts people in the weak hand quick sand.
Welcome to Strong Hand Land! Which means you are 1 of 3 Americans that have a household budget. 1 Bravo! People in this category also take planning a step further by protecting themselves and their families with positive experiences to sustain wealth and negative experiences such as divorce or sudden death.
Taking a hike deeper into strong hand land, you’ll find individuals with income and assets that are well diversified, income plans for present and future with inflation in mind, and confidence that financial goals will be met. Strong hand people know how to control emotions during difficult personal transitions or financial market volatility which is imperative for financial well-being. Here are more characteristics of the strong hand people:
- Plenty of income and assets to pay for lifestyle regardless of inflation
- Awareness of spending/lifestyle needs
- Awareness of income and assets
- Diversification of assets so one asset or class of assets is less likely to impact your financial success (i.e. “Don’t put all your eggs in one basket”)
- Plenty of cash and/or access to cash when needed (including unexpected cash needs)
- Adequate insurance protection
- Confident financial goals and needs will be pursued
- Control emotions during difficult personal transitions or financial market volatility
- Transparency and communication among stakeholders (i.e. spouse, partner, family member)
- Education and information for successful transition at incapacity or death
How to ensure you have strong hands?
Whether you are fully in the weak hand quick sand or just vacation in strong hand land, you may need to take some action. Like exercise or physical therapy, financial planning takes work and maintenance, it isn’t just a flip of the switch movement. The worst thing you can do is nothing. Start by following these steps with a financial professional: