How To Really Ruin Your Financial Life and Portfolio

Chapter 15Do Not Have a Plan for Your Investing or for Your Financial Life Generally

Usually, the plan for most Americans is simple: seek to amass sufficient assets to meet your liabilities.

For most Americans, their number-one liability is providing enough jewelry for their daughter-in-law.

HA! Fooled you. You were not expecting that, were you?

No, seriously, as my dear pal, Ray Lucia, likes to tell me, a grown-up’s main financial plan has to be to match his or her assets with the liability of providing for himself/herself and his or her adult family after he or she stops working.

A secondary asset/liability issue might be paying for a child’s college education. In today’s sad educational climate, it might also be necessary to pay for a child’s entire schooling at a very expensive private school, starting in elementary school.

Match assets and liabilities. That sounds fairly basic, doesn’t it? All you have to know to do it is the rate of return on your investments and how much it will cost you to live after you retire. That means knowing how long you are going to live and in what state of health and (this is a killer) what the rate of inflation will be.

This is actually incredibly, unbelievably complex. You can at best come up with prior decades’ rate of return on stocks and bonds and real estate. You cannot POSSIBLY know what the future rate of return will be. Likewise, you cannot possibly know what the inflation rate will be after you retire or even before you retire.

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