The Dynamic Duo: Preparation + Diversification

I was recently a part of the panel for the National Urban League Conference called?“Your Money, Your Future, Your Legacy: A Fresh Path To Financial Empowerment”.??The?panel ?was dynamic and the conversation was flowing. One of the things that I really wanted to add was how the headlines aren’t matching what we are seeing, especially for African Americans, when it comes to all layers of money.?

My panel questions were a mix-up of:??

“Take us to the other end of the age spectrum ... How do you plan for your financial freedom after retirement – how do you know what is “Enough?”

-or-?

“Too often, people believe that there is only one path or single formula for wealth creation, whether that is a specific asset class (like real estate or crypto) or a single financial practice, such as avoiding debt. Is that the right approach? If not, what is?”

When I was building my talking points before the event, I wanted to lead with this?Preparation should be paired with Diversification.?The reason is that the answer would legit answer or jump-start the focus at hand. Where you focus, your funds will follow and even in adversity things can align.

A while ago a couple of headlines read some of the following:?“Social Security could run out in 2033” or “How the 1% does wealth creation”. The notion around how “you need 1 Million Dollars to retire”/ “about wealth creation”, is subject to your situation.?While those articles are good things to think about, they could also leave many people wondering how actual it is that they could obtain that.?

The reason for this is that there is no one set formula on how to obtain the said goal. For people to know about that financial goal or any, they have to set a level on where they are. I have this saying “Audit Your Wallet ' ' if you don’t understand your means - it will be hard to build into that Million-ish or major goal.?

When I see commentary around people who have to retire or are being laid off with little to no retirement savings or savings in general, the feedback is that they should’ve saved more or that they didn’t have their priorities in order. Some people had to focus on keeping their lives afloat more on the current than wondering about the currency in the future. A lot of people didn’t have the resources to save as much as they needed to do so or know which funds would be the best ones to allocate their retirement into for long-term growth. You don’t know what you don’t know and that can cause many to not see the compound interest in which they wanted to have. Another point is that a lot of pensions that were around years ago were gone by the time some employees were deemed to soar into the golden years.?

How?Preparation +?Diversification?shows up in scenarios:

Overall - you have to look down the line to see what scenarios you could experience financially that would be interesting ( not saying difficult) for you to deal with. Could it be retirement in the next 10 -20 years or could it be a layoff, etc - you have to look at what they are. After that, you have to make an action plan of ways to be prepared and what streams of income could help you float while the ocean feels rocky.?

The foundation of it all is to look at your financial objectives and current financial practices to see how they sit in these types of situations.?

When it comes to retirement:?What income streams would still flow strong during the golden years - those two parts to your formula will show you any potential gap you may have in the future. Inflation can also deflate your dreams. Also within your holdings, which are making sense to you to allocate a strong percentage to have your account value grow? Having your funds all tied into just your Target Fund isn’t going to guarantee that you see funds. Another thing is building up more than just one retirement fund - depending on your tax bracket, both versions of IRAs are dynamic for you to build those streams. Don’t only just contribute, but distribute into funds like ETFs and Index Funds to grow. Beyond investing, you should be also looking to see what other things you could establish now to grow later - from real estate/REITs to ______. The opportunities are endless, but you have to prepare for your retirement now (or even during) and diversify your income to last throughout those years.??

When it comes to being laid off or scaling your finances:?You have to go back to looking at your financial objectives paired with your current financial movements. Are you saving enough in case of emergency or do you have income streams? Yes, it is said that only 1 income stream is close to none, but have you looked at your means to make them mean more? How do you know what your ‘gap’ number is or how much you need if you don’t know where you are? That ‘gap’ number is how much you’re making now subtract how much you need to survive + thrive. That number is what you need to feel comfortable no matter the situation.?

Individualism of Personal Finance

Beyond the 401K, Savings, Pension, and Social Security “stack” - what additional income streams would fill the potential income gaps you could see? Would it be real estate investing, cryptocurrency, entrepreneurship, or crowdfunding? When people envision their retirement to run or have a balanced financial life, they would then be able to develop ways for it to be funded.?

Preparation paired with diversification can apply to a lot of scenarios like how to plan for the uncertainty that we are facing in this economy. Also, knowing how your formula will look different from others.?Do money your way.?

In conclusion, preparation and diversification are two key strategies for success in any area of life - especially your money. By being prepared for the unexpected and by diversifying your assets, you can minimize your risk and maximize your chances of being aligned financially. Two things can be true at the same time, but together they can shift beyond your stacks, that is Preparation + Diversification.?When you prepare for life (as much as possible) and develop your own diversification stack, it will not only compound but also pay dividends into the future.?