The market’s recent drop has left everyone misty eyed and shaken to the core. Anyone who says so differently either has their money stuffed in mattresses, buried in their backyard or gets the bulk of their news from MTV.

I think the fastest way to get back on track is to get back to basics. Not just the basics of investing, but back to the reasons that we invest in the first place.

I am a Professional Stock and Currency TRADER. I am not a long term investor. As such, I question everything. I mean everything. When it comes to the proverbial glass of water: I don’t see it as half full – I do see it as half empty AND I want to know where the other half went. This healthy skepticism has served me well and is one of my endearing qualities.

For the record:

1. I was born at night, NOT last night.
2. I think the drivel that is served up as “financial planning” is a lot of bunk.
3. Life is complicated and you need a map to get from one place to the next.
4. Does financial planning have a place in life? Yes – without a doubt.
5. What I don’t like is how financial planning is packaged and sold.
6. I don’t like boilerplate and the back-end nonsense.
7. I believe that the “planners” should plan and leave the investments to others.
8. I think there’s a HUGE and FATAL conflict of interest when a financial planner creates and completes a plan for a client and then gets PAID to implement the plan. And vice versa. I’ve been doing this along time and I can say from the basis of fact that anyone who puts together a plan and then implements it is doing you a HUGE disservice.

Financial Planning means different things to different people. When you strip away all of the boilerplate, it really boils to this:

In order to be successful as an investor or trader, you must have your house in order. Given what has transpired over the past few weeks – is your house in order?

The 7 Most Important Questions that You Will Ever Answer

1. Do you know exactly what would happen to your family if you didn’t wake up tomorrow?

2. Do you know exactly what would happen to your family financially if you became disabled and could no longer work?

3. Who will you need to, or just want to help, educate? When? And do you have your arms around what it will cost to do so?

4. How and when do you see yourself retiring? What will you do, and what will it cost to do it – not just the day after you retire, but 10-20 and even 30 years later?

5. Are you parents living? If so, will you be expected to contribute to their support at some point? And have you made any provision for the possibility that you may need nursing home or other care, late in your own life?

6. How important is it to you to be able to intervene in the financial lives of your children and grandchildren – while your still here, as legacies, or both? How do you plan to do it?

7. Assuming, as we have to do, that when you’re both gone, up to half your estate will get taxed away, how do you want the tax to be paid? If you want the kids to just pay the half, will they be forced to sell something you really wouldn’t want them to have to sell?

8. Heaven forbid, but is there a special needs child in your family?

ACTION STEPS

Before you worry about whether or not the stock market is going up tomorrow, take a few minutes and answer the above questions.

1. Get a notebook, paper and some dividers
2. Each question has it own section in the notebook
3. Sit down by yourself and answer all of the questions. Make notes, jot down your thoughts. Keep in mind that there no right and wrong answers. This exercise is a continuous work in progress so speed is not of the essence.

When I did this exercise the first time, it took me about 2 weeks to think through and answer each of the questions. Don’t take this lightly – your family’s financial future is at stake.

4. Once you are done, ask your spouse, partner or significant other answer the questions.

5. Once both of you have finished, schedule an appointment with each other and sit down together and review your answers.

Where are you on sound footing? Where do you need some help? If you need some help, seek out a qualified professional to help you with that particular question.

6. Now give yourself a pat on the back. What you have done is take the first and most important step to becoming financially independent AND you have just spent more time planning your financial future than 99% of the rest of the population.

7. Get out the notebook once a quarter and review it. Update it with anything that has changed.

Good Luck – You’ll sleep better at night knowing that you’ve done all you can you’re your loved ones.

Until next time,

RAC
The Intelligent Trader