4 Ingredients in the Secret SauceWith all the gnashing of teeth over day-to-day financial worries, there are just four primary ingredients in the ‘secret sauce’ for your financial success. Each ingredient is readily available yet difficult to faithfully put into use.

The four ‘secret sauce’ ingredients are:

1 – Sufficient Savings– It’s easy to believe that saving 4-5% of your income in a retirement plan is sufficient. In reality, your savings rate will need to be much higher in order to enjoy a financially sustainable future. Our soon-to-be live website revision includes a whimsical retirement savings calculator. The idea is to provide light-hearted, yet straightforward comments for various saving percentages.

Retirement Savings Calculator

For most, saving 15% or more of income spread between retirement plans and other investments puts you in the game.

2 – Sufficient Risk– Plainly put, trying to find ‘riskless’ investments is a fool’s errand. Because information is always imperfect, it’s impossible to fully eliminate uncertainty and risk. Investing in stocks is uncertain…more risky, at least in the short term, but historically stocks have provided returns well above living cost increases (inflation). Bonds are less risky but have rendered lower returns over the long term. Failing to accept, even embrace ‘risky assets’ can be a cause of financial failure.

3 – Sufficient Time– Many financial ills can be remedied with the ‘tincture of time’ as my Mom (a retired nurse) likes to say. Time can be a friend during your working life if you save and invest for the future. If, however, you don’t take care of your financial life during your peak earning/saving years, time can become a formidable enemy. We created a short guide titled, Your Financial Planning Best Before Date, that describes the action steps needed in different life stages to prepare for a sustainable financial future.

4 – Sufficient Discipline- We saved the hardest, and arguably the most important ingredient, for last. All of us are filled with emotions that can become obstacles to making smart financial decisions. We sometimes have deeply held beliefs that really aren’t true. We often take cues from the short-term obsessed, financial media even though we say that we are focused on our long-term aspirations. We worry that the ‘the market is too high’ or perhaps ‘this time is different.’ Over 90 years of market data show the way if we can manage to stay invested throughout all types of market conditions.

What we Can Control

Thinking in Bets author Annie Dukes says that the quality of our lives equals the sum of our decision quality plus luck. We can’t control luck but we can influence the quality of our decisions…the ingredients of our personal ‘secret sauce’. Start there. Ready for a real conversation?

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