Thursday, January 2, 2014

A simple plan for 2014: Expect the unexpected

Overall, most economic indicators show that the economy is gaining strength. A large contributing factor was the Federal Reserve bond buyback. In non-financial terms, the economy has been boosted by the medicine injected by the Federal Reserve.

In 2014, it appears the Federal Reserve will begin to wean us off the stimulating medicine. As we open the book on 2014, the question becomes whether or not the economy is strong enough to stand on its own two feet.

Only time will tell, but there are other hurdles that stand in the way of steady improvement. I believe our nation’s deficit spending is a major concern. And who knows where the uncertainty over the new health care law will lead?

Although the actions of the Federal Reserve and Congressional spending are important in the big picture, my concern as a financial adviser is the impact all these policies will have on my clients and readers.

I am neither a market forecaster nor an economist, but I have a feeling 2014 will be a somewhat choppy year. That could easily translate into interest rates beginning to climb and a stock market seeking direction.

For your kitchen table planning, I believe you need to maintain financial discipline regardless of the direction of interest rates or the stock market. For example, you should continue contributing to your retirement plans and use your credit cards judiciously. My suggestion for 2014 is to keep it simple. Expect the unexpected and stay on target regardless of the negative headlines. That means, among other things, paying yourself first and holding the reins on credit card spending.

Reviewing the past year, I’m finding that far too many people over thought it. Their instincts said the economy would collapse and “experts” and commercials urged pouring money into gold and silver. Don’t get me wrong, a reasonable percentage into precious metals is fine, but too many people listened to too many commercials.

Unfortunately for those that bought large amounts of gold in 2013, the gold market fell hard. Others, who listened to the doom and gloom on television, sat on their cash and their hard-earned money barely grew.

Too many gold buyers and cash sitters missed out on all the fun in 2013. Most of them would likely have fared better by sticking to their original strategies.

I have always said that wealthy retirees didn’t necessarily choose better investments than others. Rather, over the years they remained disciplined and consistent with their investments in a myriad of market conditions.

They had a disciplined method and they stuck with it. They paid themselves first during tough times, didn’t overspend during the good times and didn’t panic when the television newscasters said it was time to panic. In short, they did not change their investment strategies.

Looking at their success reminded me that simple and consistent money habits can turn out just fine. Again, I suggest you keep it simple in 2014. Don’t let headlines and others derail you from your financial goals and investment objectives.

Naturally, I will do my best to keep you informed and up to date, and I wish my clients and readers all the best in 2014. I plan to be with you throughout the year to help keep you educated and informed.

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