Take Care of the Pennies...

11/01/2011 3:30 pm EST

Focus: MARKETS

Evelyn Jacks

Founder and President, The Knowledge Bureau

Especially in these times, financial waste is a problem that investors must be ever-vigilant about, says Evelyn Jacks, who explains in this exclusive interview with MoneyShow.com how proper planning can make a big difference.

Everyone is looking for hope. Times are really pretty difficult in the economy and throughout the world. What is your message of hope?

Well, you know, we can’t do too much about that, can we? It is what it is. We are in the most significant volatile and fragile times since the Great Depression.

While people can fret about it, the reality is, all the economists are telling us it’s going to be around for awhile. There’s not going to be a quick fix to the kind of malaise that we find ourselves in from a global economic perspective.

But my message is still one of hope, because in my career I’ve found that people have left a lot on the table, even within managing their own portfolio. Whether that’s the management of your tax return—which in fact is going to erode more of your wealth than what’s going on in the marketplace today—or taking a close look at the fees that you pay to make your investments, or even taking a look at your own financial behaviors...

Really it's understanding the difference between wants and needs, and how you can make more new money happen out of those personal choices that you make. That is, in the end, what’s going to help you preserve your wealth over this blip of time.

It’s going to get better, but we do have to manage our way out of this. So those are three core areas that I have found that people are not paying attention to as they’re fretting about the marketplace.

How do we specifically go about doing that?

You know, I think to begin with understanding what your personal net worth is today. Just take the time to list your assets and your liabilities and get that number—it’s your personal balance sheet—and then do it for your family.

Because that’s your statement of accountability. In the end, you are really trying to take a look at what is my financial stability, what is my financial position today, six months from now, a year from now.

Start there, get a real good assessment, and then do an old-fashioned budget, really understand non-discretionary spending—food, clothing, and shelter. If 100% of your budget is going to your mortgage, and, well, you're eking out credit for everything else, you’ve got too much shelter and you’re going to have to take a look at that.

Do a budget, and then set your projected goals. Because financial planning and investment planning and tax planning is about setting up your future...but we have to fix the current.

You mentioned doing this for yourself and your family. Do you get your family involved, your spouse and perhaps your children as well?

You know, that’s one of the really powerful parts of personal financial planning. When you take an intergenerational approach to your financial planning, and what I prefer to call your wealth management, then this market cycle is really just one of many going forward.

So yes, in our family, we do this as a family of four. We plan their intergenerational market cycles, and we can do that by taking a good, keen eye on what our adjusted cost bases are from our various assets, and making sure that we income-split and put those assets in the right hands while the cost bases are low, so now is a very good time to take a look at that.

Is there a worksheet that people would use?

Well, you know, at The Knowledge Bureau, we do have calculators for all of those things, so from cashflow planning to planning your adjusted cost basis, to really taking a look at your budgets.

We call it a spend and save calculator, so people can really actually figure it out from a hard-dollar point of view. I’m always amazed at how delighted people are when they take the time to do that process.

So it sounds like even though we’re in difficult times, we can use that to our advantage by tightening the belt and perhaps ending up better than we started.

This is what we are finding, that people are in delight, because it’s not as bad as they thought when they do the numbers.

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