WHAT DOES IT TAKE to succeed financially? Here’s my list of the 10 most important choices you’ll ever make:
1. How much you borrow for college. Planning to become a journalist or a social worker? The lower your likely lifetime earnings, the less sense it makes to take on a heap of education loans.
2. What career you pursue. Obviously, the more you earn, the easier things should be financially—though this advantage is often frittered away through excessive spending.
3. How early in life you start saving—and how much you save each month.
4. How big a house you buy relative to your income. One way to waste a handsome salary: Purchase a home you can barely afford, leaving you starved of cash for other goals.
5. Whether you marry the right person. A quick way to lose half your wealth: Get divorced. The slower route: Marry someone with bad financial habits.
6. How often you replace your car. For the typical American family, cars are a huge financial drain, second only to housing. Is your sense of self-worth riding on the fanciness of your car, the size of your home and other possessions? You’re sunk.
7. Whether you make a lifetime commitment to stocks. Every year, there’s another terrifying reason to abandon the stock market. But if you look back at the market’s performance over your lifetime, you’ll likely wonder why anybody would invest in anything else.
8. Whether you have children. They’re more fun than guinea pigs, but a tad more expensive.
9. Whether you waste time and money on the foolish pursuit of market-beating gains. The reality: Your chances of beating the market over a lifetime of investing are so small as to be hardly worth considering.
10. When you claim Social Security. Remember, the big financial risk isn’t dying early in retirement. Rather, the big risk is living longer than you ever imagined—which is why most folks should delay Social Security until at least age 66 and perhaps age 70, so they receive a larger monthly check.
As you might have noticed, pure investment decisions don’t figure prominently on my list. One implication: If you’re grappling with the 10 decisions above, you will likely receive a fair amount of help from a good financial planner—but very little help from the typical stockbroker.