Luck Isn't a Financial Plan

_{By Bromwich+Smith Staff | 1007 words | Reading Time: 5 minutes | Last update: 2023/03/16}

When we hear the work luck, many phrases come to mind “beginners luck”,  “lucky streak”, and “luck of the draw” are all popular catch phrases. As we think about St. Patrick’s Day, “luck of the Irish” pops up more but what does it mean and where does it come from?

Folklore says that Irish luck comes from Leprechauns. The story goes that anyone who is lucky enough to catch one of these elf-like creatures will be granted three wishes in exchange for freedom and the opportunity to store pots of gold at the end of the rainbow. Another well known- but maybe not so well liked tradition is to pinch anyone not wearing green on St Patrick’s Day. This is because Leprechauns are known to pinch, and if you wear green you are less likely to be spotted by one and ultimately pinched.

However, the luck of the Irish phrase does not come from the folklore of leprechauns but rather from the late 19th century, during the gold rush.  The actual word ‘luck’ is from the shortening of the Dutch word ‘gheluc’, which means happiness and good fortune. During the gold rush, many well-known and wealthy miners at the time were of Irish descent and it is believed that this is where the reference to Irish luck first began.

How does this Irish luck, or the general thought of luck relate to financial planning and readiness? Ultimately, many of us are hoping to find the luck of the Irish and gain wealth, knowledge and good fortune to aide us in overcoming financial challenges. Unfortunately, the likeliness of trapping a leprechaun, and finding his  pots of gold at the end of the rainbow is as likely as finding Santa Clause on Christmas morning. However like the Leprechauns but we can take steps to prepare and ensure that our financial well-being is planned for and on track. 

If you can’t find a Leprechaun, what can you do?

Step 1: Understand your finances

Having a clear picture of what your financial situation is today, will shape your personal financial planning process going forward. Find a system that works for you, which could be a budget calculator, an app or the old fashioned way, with just a pen and paper. Start with your income, and include any additional benefits ie child support, alimony, government rebates etc. Next examine your expenses and debt. Write down what you are currently paying, include all non negotiable payments ( child support that you pay, mortgage or rent) and then all variable expenses ( utilities, groceries, streaming services, snow removal, car costs etc.). This will give you a clear picture of what you have left over, and what you may be able to adjust to create more disposable income.

Step 2: Define your financial goals

When defining your goals consider these three things:

1. How much money you need to pay your bills.
2. How much money you need to pay off your debts.
3. How much money you’ll need to save and invest to achieve what you want. 

No two households will have the same financial goals- and your goals may differ from other members in your household and that’s okay. Start with ensuring your bills are covered, and work through your list of priorities. You might not have a clear picture of how much you need to save for retirement, or emergency funds. Talking to a financial advisor will help set you up for success for years to come.

Step 3: Pay debts and save.

When it comes to debt repayment, there are many different methods and you may need to test a few methods out before you find what works for you. Some will start with the lowest debt first, and once it is paid off take the money they would have used towards that debt on the next lowest debt. This is known as the snowball affect. Others will tackle the highest interest loan first, known as the avalanche affect. Either way- you will want to know who you owe money to, how much you owe, the interest rate and the terms of the contract. Some debts may have a penalty for early repayment. Make sure you understand the details of your debts before you start tackling them.

 You may want to consider opening a savings account if you haven’t already. These accounts encourage monthly contributions that help you build a fund for emergencies or other substantial expenses you might need to pay down the road. At the same time, think about opening an investment account as the returns could get you closer to your saving goals. 

Step 4: Put your financial plan into action

Now that you’ve created a plan, take time to review it. Talk to a financial planner to see whether you’ve missed something and make sure your numbers add up. They can be incremental in ensuring you are using the right accounts to accumulate the most interest possible and set you up for success.

If you can’t afford one, talk to someone you trust, such as a close friend or family member. Once you’re confident you’ve created a solid personal financial plan, its time to test it out. 

Step 5: Monitor and evolve your financial plan

Your individual financial plan is a “living” document — it’s going to evolve as your financial footing changes. We recommend reviewing your personal financial plan every year or so- or as soon as you notice something is not working. Having to change your original plan is not a failure, all plans need tweaking and changes as time evolves.  

If you start your planning now you won’t need the luck of the Irish to get you to that pot of gold at the end of the rainbow. Just remember to wear green today as you definitely don’t want to get pinched by those tricky Leprechauns. 

Nevertheless, if you are feeling financial stress and don’t know where to start, we’re here to help. With Bromwich+Smith you are never alone and we ensure that our expertise will leave you feeling hopeful and confident. Call our Licensed Insolvency Trustees today for a free, no obligation, confidential consultation 1-855-884-9243. Let’s see you flourish!