The 3 Most Important Financial Lessons Everyone Should Know

By Net Worth Advisory Group

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Forget the noise of the market. We believe the real secret to lasting wealth lies in the following three simple, important financial lessons.

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1. You Need a Customized Financial Plan That Fits Your Objectives

It’s important to recognize the truth that personal finance is deeply personal. What works wonders for your high-earning tech-savvy cousin or your risk-averse neighbor might not be the perfect fit for you. 

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Your plan should be meticulously designed to help you pursue your specific objectives. Without a clear map, you’re drifting and hoping for the best, making reactive decisions rather than proactive ones.

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This customized plan should encompass the following key areas:

• Goal setting: Clearly define your short-term (e.g., emergency fund, new car) and long-term (e.g., retirement, legacy) financial goals.
• Budgeting and cash flow: Understand where your money comes from and where it goes. This is foundational to gaining control.
• Emergency savings: Build a robust emergency fund (3-6 months of expenses) to buffer against unanticipated events.
• Investing strategy: Align your investment choices with your risk tolerance and time horizon.
• Retirement planning: Prepare for long-term financial independence by determining appropriate contribution levels, planning smart withdrawal strategies, and understanding how Social Security and pension benefits fit into your overall retirement income.
• Tax planning: Look for opportunities to reduce taxes both now and in retirement, including thoughtful charitable giving strategies, tax-efficient investment positioning, and tax-loss harvesting when appropriate.
• Risk management: Consider insurance (life, health, disability) to safeguard your assets and income.
• Estate planning: Even in early adulthood, think about wills, powers of attorney, and beneficiary designations.

When you craft a plan that is uniquely yours, you’re more likely to make wise financial decisions and reach your goals.  

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2. Take Emotion Out of Your Financial Plan

Human beings are emotional creatures, and unfortunately, emotions can be the enemy of sound financial decision-making. Panic and greed are particularly destructive forces against smart investing. 

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This is why one of the most important financial lessons is to consciously remove emotion from your financial plan. 

• Resist the allure of hot stocks: When the media hypes the “newest tech stock” promising astronomical returns, the temptation to jump in can be overwhelming. However, chasing these fads often leads to buying high and selling low.
• Don’t panic during volatility: Market downturns are inevitable. When stock prices plummet, the gut reaction is often to sell everything to prevent further losses. This is precisely the wrong move. Selling during a crash locks in your losses and prevents you from participating in the eventual recovery.
• Embrace dollar-cost averaging: A powerful strategy for taking emotion out of investing is dollar-cost averaging. This involves investing a fixed amount of money at regular intervals, regardless of market fluctuations. 

A well-constructed financial plan includes clear, long-term goals and an investment strategy designed to weather various market conditions. Stick to that plan. 

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3. Drown Out the Noise

The constant barrage of conflicting opinions, dire predictions, and overly enthusiastic forecasts can be exhausting and make you doubt your actions and decisions. Drowning out the noise is a critically important financial lesson.

• Be skeptical of sensationalism: Financial news thrives on drama. Catastrophic headlines drive clicks, and bold predictions generate discussion, but rarely do they provide actionable, long-term advice relevant to your personal plan.
• Filter your inputs: You don’t need to consume every financial article, podcast, or tweet. Identify a few trusted, reputable sources and limit your exposure to everything else.
• Resist peer pressure: Your neighbor might brag about their latest investment win or lament a loss. Your friends might discuss the newest cryptocurrency. While social interaction is healthy, basing your financial decisions on anecdotal evidence or peer pressure can be dangerous. Remember Lesson 1: Your plan is unique to you.
• Focus on your own horizon: Short-term market fluctuations and economic forecasts are largely irrelevant. By focusing on your long-term goals and the consistent execution of your personalized plan, the daily ups and downs become mere blips on the radar, easily ignored.

Partner With a Professional to Apply These 3 Important Financial Lessons

Want to actually experience financial prosperity? It really comes down to mastering these three core money moves: You need a personalized financial game plan that truly fits your life goals, the discipline to ditch your emotions when making investment decisions, and the focus to ignore the nonstop noise from the media and your friends.

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At Net Worth Advisory Group, our team applies these three pillars of sound financial planning and wealth management advice to significantly improve the lives of our clients. 

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As a fee-only wealth management firm, we’re committed to helping you live the life you’ve always imagined.

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Call us at 801-566-6639 or schedule a complimentary, no-obligation consultation to see if we are a good fit to help you pursue your goals.

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To learn more, visit our website.

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About Net Worth Advisory Group

Founded in 2003, Net Worth Advisory Group is an independent, fee-only, CERTIFIED FINANCIAL PLANNER® and investment advisory firm located in Salt Lake City, Utah. We specialize in helping people transition from the workplace into retirement and ensuring that those who are already retired will not outlive their nest egg. Our top priority is to have clients experience a greater sense of ease with diligent, personalized wealth care and the implementation of customized financial plans and ongoing personalized asset management. We equip all clients with a comprehensive financial plan, meeting every six months to update as needed and review investment performance. Our team is passionate about providing comprehensive financial planning with the fee-only model, and we love feeling like we’re making a difference in our clients’ financial lives.

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As a NAPFA-registered fee-only advisory firm, our recommendations are untainted by a hidden agenda to sell financial products paying large commissions. Unlike our competitors at brokerage firms, insurance companies, and banks, we are compensated solely by our clients, so we are financially motivated to provide objective advice that is always in our clients’ best interests. Anyone can call himself or herself a financial planner, but only an advisor with the CERTIFIED FINANCIAL PLANNER®, CFP® designation has met the education, examination, experience, and ethical requirements mandated by the CFP® board. According to the CFP Board, there are 97,000+ CFP® professionals in 2023, representing about 1 in 3 financial advisors in the U.S. Net Worth advisors are also members of NAPFA, which only has about 4,600 advisors, and are either CFP® professionals or CFP® professionals in training.

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Net Worth Advisory Group’s mission is to significantly improve the lives of our clients by delivering exemplary financial planning and wealth management advice that enables them to live the lives they have imagined.