"How Do Your Financial Priorities Stack Up With Our Pyramid?"

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Taylor Larimore
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"How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Taylor Larimore »

Bogleheads:

We spend much of our time on the Boglehead Forum debating about which funds are best. Christine Benz, Morningstar Director of Personal Investing, believes that investment selection is the LAST of six steps of what should be the investors' top priorities.

You can see all six steps here:

How Do Your Financial Priorities Stack Up With Our Pyramid?

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
dbr
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by dbr »

I agree. There ought to be a place to enshrine that in one of the stickies on planning/asking questions.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by dwickenh »

The pyramid makes sense to me, now if I could just get some of King Tuts gold.................

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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by CWhea1775 »

I think that "controlling investment costs and expenses" should be in the pyramid as well.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by dbr »

CWhea1775 wrote:I think that "controlling investment costs and expenses" should be in the pyramid as well.
Yes. That one level should be "Tax and Cost Efficient"
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by oldzey »

Steve Dunn's remarks are interesting in regards to this discussion, originally found at: http://socialize.morningstar.com/NewSoc ... 62377.aspx
ORDER OF IMPORTANCE IN MANAGING ONE'S FINANCIAL AFFAIRS:

As a rather sluggish slice and dice type, I think that issue versus going total stock market is way down the list of what is important in managing one's financial affairs. In order of priority, I would list what is important in the following order of priority:

1. How much you earn (the value of your human capital).
2. An intelligent insurance program.
3. Your savings rate.
4. Your allocation to stocks versus bonds.
5. Have a reasonable diversification to your portfolio (anything reasonable will do).
6. Rebalancing to manage risk.
7. Tax management.
8. International versus domestic
9. Value versus growth.
10. Small versus large.
11. Slice and dice.

After number 7, it just doesn't matter much IMO, for about 99% of investors. I say that as one who has watched the numbers pop up on my Quicken computer screen over the passing years. Some things matter a whole lot more than others as to what really influences those numbers.
Note that the top 3 of Mr. Dunn's list pertain to the acquisition and protection of assets, before any investing starts (similar to the M* pyramid). I'd also add that low costs/expenses of financial instruments should be included in there somewhere, too (maybe #4.5).
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by SeeMoe »

Good chart! Like the one where taxes are located in that too many DIY's seem obsessed with avoiding taxes over the big picture. A Philly radio host who covered the markets used to often say " Be glad that you are paying taxes on your investment folios, it is proof that you are successful." I followed that advice with relief and, over the years, concentrated solely on the AA plan that has been very rewarding,....and tax efficient.

SeeMoe.. :dollar
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by grabiner »

We had a similar discussion of what goes at the top of the pyramid at the DC Bogleheads back in 2005: Levels of Asset Allocation (Note that this Morningstar discussion is from before the days of ETFs, so value indexes weren't good for taxable accounts at the time).

The first decision to make in asset allocation is Steve Dunn's #4 through #6: how much do you hold in risky versus low-risk assets? This is more important than tax management, because it determines the risk of your portfolio. If you have a tax reason or an expense reason to prefer stocks in your taxable account, but your taxable account is larger than your target stock holding, you should still hold some bonds there.

The second decision is the asset classes, which is primarily Dunn's #8 for international versus domestic, but can also include things such as real estate and high-yield bonds. This is usually less important than tax issues: if you like high-yield bonds, they still aren't worth holding unless you have room in your IRA.

And the third decision is the subclasses, Dunn's #9-11, as well as choices of specific funds: do you want the value fund in your IRA to be Vanguard Value Index, Windsor, Windsor II, or Equity-Income? These are the least important decisions, and don't matter much. If you have a well-diversified, low-cost portfolio with the right overall asset allocation, and you are saving enough money, you should do fine regardless of which funds you choose
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Adam Rose »

This is so funny! Even though the Morningstar article is dated 01-23-17, I had never seen it - or the pyramid - before this thread. And I have just come up with my own similar-but-not-quite-the-same imagery to make a somewhat wider :shock: point that I've been noodling recently and that I am currently planning on developing into a public lecture that I'll probably deliver next year:
THE TRUE VALUE OF MONEY:
RETAIL INVESTING AS A GATEWAY TO WISDOM


In a capitalist society, retail investing can play the role that sexual love plays in Platonic philosophy:
the blunt, material force that lures us onto a path towards subtle, ethereal wisdom.
Image

Larger version:
https://www.adamrose.com/public/images/ ... -Rose).png

Half of the knowledge and inspiration that have gone into this have come from being a longtime reader of Bogleheads, first at Morningstar and then here. The other half comes from 20+ years studying and teaching the classics in general and Plato's dialogues in particular.

Thanks, Taylor. And, thanks, Bogleheads. You all rock.
:sharebeer

P.S. Feedback, comments, suggestions, etc. about my pyramids welcomed but of course not obligatory. :D
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by TD2626 »

I absolutely agree with the idea that some things are more important than others - orders of magnitude more important.

Case in point - the decision on whether to, for example, go with Fidelity S&P 500 fund or the Vanguard S&P 500 fund is discussed here far more often than something that matters far more: the decision of whether or not to save one single dollar more per day.

According to Portfolio Visualizer, for the period that both existed (since 1988), an investor who invested $10k (inflation adjusted) each year would have had $1,709,676 if they used the Vanguard S&P 500 Fund vs $1,706,561 if they used the Fidelity S&P fund. $3000 is a big deal, right?

No - deciding which S&P fund to invest in is a tiny decision compared to deciding how much to save. An investor who put in an extra dollar per day in this same scenario would have $1,772,079 (Vanguard) vs $1,768,851 (Fidelity). That extra dollar a day, through compounding, totaled up to around $60,000.

Doing a few exercises like this would help people focus on the big things that matter, like savings rate, overall stocks/bonds/cash asset allocation, and the very biggest decisions in investment selection (like domestic vs international stock or taxable vs tax-exempt bonds). Smaller things (like which broadly-diversified, low cost large cap blend fund to use) pale in comparison to the base of one's pyramid.

The big focus should be on percentage points, not basis points.

(Of course, that being said, I'm off to read and comment on threads that are debating issues where only basis points are at stake...)
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by GAAP »

TD2626 wrote:I absolutely agree with the idea that some things are more important than others - orders of magnitude more important.

...

No - deciding which S&P fund to invest in is a tiny decision compared to deciding how much to save. An investor who put in an extra dollar per day in this same scenario would have $1,772,079 (Vanguard) vs $1,768,851 (Fidelity). That extra dollar a day, through compounding, totaled up to around $60,000.

...
This is an excellent example that belongs in the Wiki.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Meg77 »

I love this! Thanks for sharing. I try to verbalize a small nugget of this type of thinking whenever investors with small amounts saved ask for advice regarding very particular asset allocation and investment selections. Savings rate (and as an extension, staying the course) matter SO MUCH MORE than asset allocation and even fund selection and even fees, at least until you have a portfolio well into the 6 figure range.

Of course it's all fine and good to try to minimize fees and select the absolute best funds from the get-go, but even loaded mutual funds and relatively expensive financial advisors can be beneficial if they start a person- or keep a person - on the investing course.

Edited to add: I think having a goal is perhaps not appropriate at the bottom. It sounds good, but many people find themselves without a specific financial goal, or between goals, at various (sometimes lengthy) points in life. That of course does not mean we can or should abandon investing during those times.
"An investment in knowledge pays the best interest." - Benjamin Franklin
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by dbr »

Meg77 wrote: Edited to add: I think having a goal is perhaps not appropriate at the bottom. It sounds good, but many people find themselves without a specific financial goal, or between goals, at various (sometimes lengthy) points in life. That of course does not mean we can or should abandon investing during those times.
I think that step belongs there and is the most important one of all. I think the problem is in the wording. "Goal" is a very specific thing that probably is too narrow and limited for the context of this pyramid. One might substitute "objectives" or "plans" or "vision" or whatever it takes for the investor to formulate something that is actionable at the next step. It is easy to quibble over details when the general idea of the scheme is what is important.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by msk »

I have never understood that very first bit, "set your financial goals" and it gets repeated endlessly on this forum as sage wisdom to the youngsters in their 30s and 40s. I had no clue what financial goal I wanted to even aspire to! All I knew in my gut was that I wanted to live a comfortable life, no regrets if destined to die young, within my means, and invest to get filthy rich quickly :mrgreen: After serious discussions with my buddy :sharebeer we decided to invest aggressively but save no more than 30% of annual income. We were both raised "frugal" hence our emphasis was on limiting savings rather than spending. Decades later we both made it to 8 figures and owned plenty of high end sports/luxury cars along the way. Despite our target of limiting savings to 30%, by the time we were in our 50s we were both spending less than 50% of annual income (by then the investment income dwarfed job incomes). All I can say to the youngsters, save at least 30% of your income and all will be fine...
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Importance of having a goal? -- Retirement

Post by Taylor Larimore »

Bogleheads:

In my view, there are few things more important than having a goal for a comfortable retirement. The earlier we start putting aside money for retirement (which can last 30 years or more), the better.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Importance of having a goal? -- Retirement

Post by Thesaints »

Taylor Larimore wrote:Bogleheads:

In my view, there are few things more important than having a goal for a comfortable retirement. The earlier we start putting aside money for retirement (which can last 30 years or more), the better.

Best wishes.
Taylor
Isn't the retirement goal the kind of lifestyle one wants to be able to support ? And without knowing that, how can one decide how much to save, how to invest it, and when he/she has enough ?
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Re: Importance of having a goal? -- Retirement

Post by Taylor Larimore »

Thesaints wrote:
Taylor Larimore wrote:Bogleheads:

In my view, there are few things more important than having a goal for a comfortable retirement. The earlier we start putting aside money for retirement (which can last 30 years or more), the better.

Best wishes.
Taylor
Isn't the retirement goal the kind of lifestyle one wants to be able to support ? And without knowing that, how can one decide how much to save, how to invest it, and when he/she has enough ?
Thesaints:

There are many things about which we do not know about the future that we must deal with.

I suggest that young workers should save at least 15% of their income for a comfortable retirement. The longer we wait--the more we must save.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Importance of having a goal? -- Retirement

Post by GAAP »

Thesaints wrote: Isn't the retirement goal the kind of lifestyle one wants to be able to support ? And without knowing that, how can one decide how much to save, how to invest it, and when he/she has enough ?
An easy target to start with is to match your retirement net income to your existing net income, using a reasonable withdrawal method or a funding level calculation. From there you can adjust based upon lifestyle choices that you will identify over time. Replacing that income is fairly difficult, gets harder the later you start and less you save, and harder still if you are unable or unwilling to count on any defined benefit plans such as pensions or social security.

Setting the target high and working toward it can allow you to reach it early. Not having a target is a really good way to ensure that you will never get there...
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Thesaints »

You guys advice seems valid for a majority of people, but what about those who don't fall into that category ?
I'm very well paid, saving close to 60% of total compensation and only need a fraction of that to support my lifestyle. In retirement I won't have to contribute to my pension anymore, nor pay for FICA. Also, I'm fairly certain that my income, coming from pension and investments, will be more favorably taxed.

clearly Your advice does not apply to me and I don't think I'm a rare exception.
My point being that before giving advice, let's see what the particular situation is.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Grt2bOutdoors »

Thesaints wrote:You guys advice seems valid for a majority of people, but what about those who don't fall into that category ?
I'm very well paid, saving close to 60% of total compensation and only need a fraction of that to support my lifestyle. In retirement I won't have to contribute to my pension anymore, nor pay for FICA. Also, I'm fairly certain that my income, coming from pension and investments, will be more favorably taxed.

clearly Your advice does not apply to me and I don't think I'm a rare exception.
My point being that before giving advice, let's see what the particular situation is.
You could choose to simply ignore the advice and move on - particularly if it is clear it does not apply to you.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by CantPassAgain »

Thesaints wrote:You guys advice seems valid for a majority of people, but what about those who don't fall into that category ?
I'm very well paid, saving close to 60% of total compensation and only need a fraction of that to support my lifestyle. In retirement I won't have to contribute to my pension anymore, nor pay for FICA. Also, I'm fairly certain that my income, coming from pension and investments, will be more favorably taxed.

clearly Your advice does not apply to me and I don't think I'm a rare exception.
My point being that before giving advice, let's see what the particular situation is.
What are you talking about? General advice that young people should save 15% is hardly controversial, and a good starting point for most young people starting their careers so as to establish good savings habits. Not sure why you would have a problem with that?

And speaking of "before giving advice" there are some things I could say but I will refrain in the interest of politeness.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by MathWizard »

Taylor,

Thanks for posting this.

I think that is a nice succinct way to present the information, emphasizing that investment selection
is much lower importance than most people put on it.

If I were to nitpick, I'd probably put "your own behavior" even lower on the pyramid, since
investor behavior is so crucial on the financial outcomes, and often so hard for us to control.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Thesaints »

CantPassAgain wrote:
Thesaints wrote:You guys advice seems valid for a majority of people, but what about those who don't fall into that category ?
I'm very well paid, saving close to 60% of total compensation and only need a fraction of that to support my lifestyle. In retirement I won't have to contribute to my pension anymore, nor pay for FICA. Also, I'm fairly certain that my income, coming from pension and investments, will be more favorably taxed.

clearly Your advice does not apply to me and I don't think I'm a rare exception.
My point being that before giving advice, let's see what the particular situation is.
What are you talking about? General advice that young people should save 15% is hardly controversial, and a good starting point for most young people starting their careers so as to establish good savings habits. Not sure why you would have a problem with that?

And speaking of "before giving advice" there are some things I could say but I will refrain in the interest of politeness.
I disagree. It depends on how much those young people make and what their financial goals are.
I don't dispute that the "15%" figure may be a good starting point for many, but that's hardly all.
In hi-tech and hi-finance there are plenty of young people with starting compensations of several 100's of k. Why should they save only 15% ?
General advice is not necessarily good advice finance and in air travel, where the average flight is from ATL-SLC and is no good for Californians visiting Boston.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by TD2626 »

dbr wrote:
Meg77 wrote: Edited to add: I think having a goal is perhaps not appropriate at the bottom. It sounds good, but many people find themselves without a specific financial goal, or between goals, at various (sometimes lengthy) points in life. That of course does not mean we can or should abandon investing during those times.
I think that step belongs there and is the most important one of all. I think the problem is in the wording. "Goal" is a very specific thing that probably is too narrow and limited for the context of this pyramid. One might substitute "objectives" or "plans" or "vision" or whatever it takes for the investor to formulate something that is actionable at the next step. It is easy to quibble over details when the general idea of the scheme is what is important.
I agree that there probably are some (rare) investors for whom thre word goal may not be the best word in their context. If they already have FI, say, they may instead want to think in terms of a "vision" - I like that word.

Essentially, one must have a time horizon - which could simply be "indefinite but at least 20+ years" and a risk tolerence, as well as concrete plans to keep saving and to know when and when not to spend.

The goal framework is best for beginners and for those who have clear, specific goals - like retirement or a house.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Thesaints »

Maybe they do have a goal, but don't know yet what it is with necessary accuracy.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by celia »

GAAP wrote:This is an excellent example that belongs in the Wiki.
I like the idea of a wiki entry but don't see how most of the ideas presented so far can be combined on one page.


After thinking about this for a while and looking at Christine Benz's pyramid again, I don't think the pyramid makes sense to me. She says:
At the bottom of the pyramid are the activities that you should spend the most time and energy on because they have the biggest impact on your results. They're the equivalent of broccoli and brown rice. Meanwhile, at the top are tasks that, though worthwhile, will have a smaller impact on your bottom line.
1. But, the bottom layer, "Having a Goal", takes up about 1/3 of the total pyramid area. So, you should spend 1/3 of your "financial planning" time thinking about a goal(s)? Really? I think the default for everyone is "Saving for the Future", whether you will need the money in 1 year, 5 years, 10, years, or 30. Some people know they will unlikely make it to retirement, due to being dealt the "chronic illness and getting worse" card or having to support parents for the rest of their (or the parents') lives. Even if someone doesn't think they will ever retire, they need to save for emergencies and for what may come their way in life. So I think this step, if needed, should take a short time, even be done before one starts their first job. "Saving for the Future" sounds like it could cover everyone.

2-3. I agree that "[Maximize] How Much You Save" and "[Determine] Your Asset Allocation" come next but I don't think they belong on a pyramid, as far as needing more time to do than the steps above them.

4. The step "[Control] Your Own Behavior" probably takes the most time of all as it encompasses all the other layers, not just staying the course and avoiding market timing. In fact, it "feels" different to me than the other layers, as if the food pyramid contained not just food categories, but also cooking methods (fry, broil, steam, microwave, bake, etc). Just as cooking methods would look out of place on the food pyramid, this layer does too, at least to me.

5-6. I agree that the steps "Being Tax Efficient" and "Investment Selection" are the lowest priority of everything on the pyramid.


Steven Dunn's list, as referenced by oldzey above makes more sense to me. It is easy to see that it makes more sense to improve on item 1 before improving on later items. It puts things in a better perspective of what is more important.

In fact, I think the issues in trying to make a wiki page could be greatly improved by first having an accurate goal and title for the page. It would help to keep the page focused on what we want it to say. Possible titles could be:
Financial Priorities
Order of Importance of Financial Impacts
Timeline of Financial Planning Steps [this implies sequential steps]

other comments?
Last edited by celia on Sat Jul 01, 2017 2:10 am, edited 1 time in total.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Thesaints »

Yes, "saving for the future", but how much ?
Ideally, one wouldn't save more than he needs for his objectives and enjoy the rest in the meantime.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by celia »

Adam Rose wrote:P.S. Feedback, comments, suggestions, etc. about my pyramids welcomed but of course not obligatory. :D
Your pyramids look more philosophical than financial. They have lots of "thinking" but not much "doing". If you are trying to inspire people to act, you need active verbs, instead of passive.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by Thesaints »

Acting without thinking sufficiently in advance is generally worse than non acting at all, due to transaction costs.

In my experience the vast majority of people either doesn't think and acts, or doesn't think and doesn't act.
Able investors think and act and there is a very small minority who thinks and doesn't act.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by TD2626 »

If you define "goal" as "plan on when to spend it, and on what", someone doesn't have a goal for their emergency fund money or safer portion of the portfolio.

The "vision" is keep it safe and liquid, but invest it and don't touch it for the long term unless there's an emergency.

Similarly, some people may have a portion of their portfolio that they have a "vision" of "invest it for future generations". No specific goal regarding when or how it would be spent, but with a clear vision, one can realize that here, there's a long time horizon and an ability to take risk.

The goal framework is great for those who have a goal. If, for a hypothetical investor, the goal is "buy a $500,000 house in 2027", pay "$300,000 for children's colleges in 15-20" years, or "retire in 30 years with investments able to provide >$50,000 a year", then using a goal framework is great. With no specific goal in mind, one must at least have a vision.

Having some sort of goal or vision is important. Deciding on a goal shouldn't take up 1/3 rd of your time, but the goal/vision will be referred to in later stages. When comparing funds, one compares "Which better meets my goal or falls in line with my vision for the investment: Fund A or Fund B".

I think an IPS is important and relevant here as well.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by dbr »

Part of the original statement I made about goal/vision was this ". . . whatever it takes for the investor to formulate something that is actionable at the next step. . ." The point of this is that planning hierarchies have the property that dilemmas at any step always need to be resolved in the previous step. So what is going on here is reminding the investor where to look for the needed input to proceed at each level.

We probably should not comment on the irony that the first step doesn't have a previous step. Maybe that is why a discussion of what is a goal, a vision, etc. is not resolvable. In the corporate world those steps end up in that area of gobbledygook called "mission statement."
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by celia »

Part of my point is that you don't need a goal in order to start saving. Even if you don't know why you are saving, you should start early and build up an emergency fund. Starting early will start you on the "habit" of saving.

What I'd like to see this thread address instead, is if we should have a wiki page and what should the focus/title of it be. I think "Financial Priorities" would be the focus of it. If that was the case, having a "goal" is not the highest priority, in my book.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by RudyS »

I'm 80 now, and would consider myself financially independent. DW and I (and 2 kids - now adults) have always lived below our means. Both come from middle class families with a strong savings ethic. But when I see the above discussion about goals, I think I (we) never had a specifically expressed goal. We "just knew" we needed to save for "the future." Maxed my 401K, etc. So, I think we could say we had a goal, but just never sat down to write it out.
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by nedsaid »

When I started out, my goals were to build up my savings, start saving for retirement, and pay off my modest student loan debt. My first priority was to save and once I had savings, I started looking for better investment vehicles. Early on, I started with a workplace savings plan too. The odd thing was that I was pretty conservative in the beginning and my IRA was in FDIC Insured Certificates of Deposit until a friend went into the brokerage business. The IRA went to him but even then I bought another CD and three zero coupon treasuries paying 8% along with the first stock I ever bought, which was AST Research.

Can't say that I thought a lot about asset allocation though I always loved having money in the bank. The more, the better. It seemed that life was unpredictable and going through unexpected challenges went better if you had good cash reserves.

The way I think of the Pyramid is probably the way college students think of the 4 food groups: Pizza, Beer, Top Ramen, and Nachos. When you start out, you just sort of go with what makes sense at the time. It isn't like I had all my life goals planned out when I graduated from college. It just seemed that doors would open up at the right time.
A fool and his money are good for business.
hoops777
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by hoops777 »

msk wrote:I have never understood that very first bit, "set your financial goals" and it gets repeated endlessly on this forum as sage wisdom to the youngsters in their 30s and 40s. I had no clue what financial goal I wanted to even aspire to! All I knew in my gut was that I wanted to live a comfortable life, no regrets if destined to die young, within my means, and invest to get filthy rich quickly :mrgreen: After serious discussions with my buddy :sharebeer we decided to invest aggressively but save no more than 30% of annual income. We were both raised "frugal" hence our emphasis was on limiting savings rather than spending. Decades later we both made it to 8 figures and owned plenty of high end sports/luxury cars along the way. Despite our target of limiting savings to 30%, by the time we were in our 50s we were both spending less than 50% of annual income (by then the investment income dwarfed job incomes). All I can say to the youngsters, save at least 30% of your income and all will be fine...
Very few people in this country can save 30 pct of their income and even fewer will even sniff 8 figures,or even 7 for that matter.
K.I.S.S........so easy to say so difficult to do.
indexonlyplease
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by indexonlyplease »

I always believe in living debt free execpt the mortgage because it takes longer (max 15 yrs) then invest along the way and when the mortgage is paid off invest more. Being debt free allows you to invest more each month. Also, makes the changes that occur in life so much more easier to deal with. And instead of being stressed out each month trying to figure how to pay all that debt you can spend your time learning how to invest correctly.

I also believe investing has become really easy lately do to the Target Dated Funds. Young peple starting out can just invest in the 401k Target Dated Fund. Which most companies use this as the default fund for employees. If they just max out the fund they never have to learn about investing if they have no interest. They can also do the same in their Roth IRA.

So, not debt and invest.
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LadyGeek
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Re: "How Do Your Financial Priorities Stack Up With Our Pyramid?"

Post by LadyGeek »

celia wrote:Part of my point is that you don't need a goal in order to start saving. Even if you don't know why you are saving, you should start early and build up an emergency fund. Starting early will start you on the "habit" of saving.

What I'd like to see this thread address instead, is if we should have a wiki page and what should the focus/title of it be. I think "Financial Priorities" would be the focus of it. If that was the case, having a "goal" is not the highest priority, in my book.
There needs to be a clear distinction between investing priorities and financial priorities.

The first priority is personal finance - which covers more topics than investing.

See the wiki: Financial planning

You only start investing after completing the first several steps of financial planning. If you don't have an emergency fund or can't meet your monthly budget, you are not ready to invest.

The Morningstar article is mistitled - it should be investing priorities.

While I'm all for adding wiki articles, I don't see a pyramid to have much value. Just follow the outline in the wiki article and prioritize according to your own situation.

I also don't agree with the Morningstar article suggestion to use their fund rating system for security selections. What happened to expense ratio?
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
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