Behavioral scientists call this reaction loss aversion. Related to retirement planning, people feel this as a loss of their financial freedom. However, if you take a closer look at what a loss means, it may often not be as bad as it first seems, especially for, or in, retirement.
Sacramento, CA (PRWEB) October 18, 2005
Wealth Mentor and author of "Wealth Odyssey: The Essential Road Map for Your Financial Journey" Larry R. Frank, Sr. MBA, CFP® has focused on research and on teaching people to make smart financial planning decisions for over twenty five years. He understands well that in a declining stock market, when people lose money, they feel this loss even more profoundly than when they experience gains.
Frank explains, "Behavioral scientists call this reaction loss aversion. Related to retirement planning, people feel this as a loss of their financial freedom. However, if you take a closer look at what a loss means, it may often not be as bad as it first seems, especially for, or in, retirement."
Frank's "Wealth Odyssey" places an emphasis on where to go financially instead of on how to just live for today, offering help and guidance to those who have lost money in a declining stock market. Frank has developed a unique "Wealth Odyssey Road Map" (WORM) that works directly with his "Standard of Individual Living" (SOIL) model. In clear and concise language, he helps readers discover the best route to achieving their personal financial planning goals and to monitor their status through his "Progress Line." Frank discusses such topics as The Wealth Rule, The Earning-Spending-Saving Formula, Using Debt Wisely and Risk Management.
With the information included in "Wealth Odyssey," he offers readers a greater understanding of what focusing on wealth, rather than income, can do for them and their families and how it can simplify living. "Wealth Odyssey" defines wealth and why it is important to understand what wealth really is today: not income, but net worth. With this understanding, financial planning becomes much clearer.
"Wealth Odyssey" had been nominated for ForeWord Magazine's Book of the Year Award, the Writer's Digest International Self-Published Book Awards, the Jada Press Third Annual "Book of the Year" Awards, as well as the Writers Notes Magazine's Writers Notes Book Awards; all in the Business or Business & Economics Categories.
Frank offers the following suggestions to keep in mind when evaluating a loss related to retirement money:
- Understand the Purpose of Money: By relating to the purpose of money—to support your unique standard of living today and build wealth to support your standard of living tomorrow—you are better able to make good decisions for your financial future, and not react blindly.
- Know Where You Are: Your unique Standard of Individual Living (SOIL) is the real benchmark that you should use to determine the resources you need to support yourself and family. Otherwise, you're following someone else's rulebook or are using benchmarks and indexes unrelated to what you are really trying to accomplish. How does a stock market loss relate to your standard of living?
- The "Wealth Rule:" Apply the "Wealth Rule" from "Wealth Odyssey" to understand the impact of losses you may encounter. The "Wealth Rule" is derived from current, ongoing portfolio withdrawal research. Simply stated, a sustainable withdrawal rate from a retirement portfolio should not exceed five percent—a lesser percent would be better, more conservative. If you are going to withdraw five percent in retirement, then this helps understand the impact of a market loss. What does that five percent translate into monthly income? If the stock market declines, can your budget withstand this decline? If not, this is an indication you should rethink your allocation strategy to minimize a market decline. You can't avoid a market decline because then you are likely structured to miss a market advance as well. Diversification is the key to this dilemma.
- Know Where You're Going: Innumerable variables out of our control will affect your retirement planning—knowing how to deal with the inevitable market changes and the effect on your plans will enable you to deal with them successfully and confidently. Frank explains the relationship between income and net worth and how knowing this helps with the unknowns of the markets, economy, Social Security and pensions.
"Everyone is looking for the formula that will lead them to financial success," Frank added. "There is a simple method and model developed by reverse engineering results of current withdrawal research, by taking the complex and simplifying it for practical application. The 'Wealth Rule' translates income to assets, and assets to income. Knowing this simplifies financial planning."
Other tips for financial freedom, a.k.a. retirement, which are helpful:
- Know the Difference between Wealthy and Rich: Wealth is not measured by how much you spend, but by how much you have not spent. Wealth is sustainable with or without an income; wealthy is not being rich. Even those with a modest income are wealthy when they are able to sustain their unique standard of living while retired. Wealthy means you are self-supporting without an income: the definition of retirement in the 21st Century.
- Remember that It's All Connected: Rather than taking an income-based approach by tackling financial topics and issues one at a time until money runs out, adopt a wealth-based viewpoint where the landscape of financial topics are clearly seen to support each other and interact with each other through a net worth-centric model. Financial decisions overlap and affect one another—know all the factors that will affect the real outcome of your decisions.
About the Author Larry R. Frank, Sr.
Larry R. Frank Sr., MBA, CFP® has twenty-seven years of financial research and real-life experiences teaching people personal finance focused on how to make smart decisions to grow and protect their net worth through a simple change in perspective from income-centric to wealth, or net-worth-centric. Rather than make things complicated, his work has been focused around simplifying the complexities of prioritizing simultaneous financial planning issues and their related calculations. He holds a BS cum laude in physics and an MBA in finance. Frank resides in Rocklin, CA.
"Wealth Odyssey" (ISBN 0-595-33720-1, trade paper, $16.95) an "Editor's Choice," is available from iUniverse, Inc., http://www.BarnesandNoble.com , http://www.Borders.com , http://www.Amazon.com or http://www.iUniverse.com . Independent book store distribution available through Ingram Book Group and Baker & Taylor.
Media kit, facts, examples, and additional story support are available at http://www.WealthOdyssey.com .
Online browse available at http://books.iuniverse.com/viewbooks.asp?isbn=0595337201&page=fm1
Larry R. Frank Sr., MBA, CFP®
Phone: (916) 773-3509
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