How To Remove Luck From Your Financial Plan

Photo by Amy Reed on Unsplash

Too many people rely on luck or chance to meet their financial goals.

As if being in the right place at the right time or getting lucky with a hot investment was the missing ingredient to cashing in on the pot of gold at the end of their financial rainbow.

To be sure, it helps when the stars align in your favor. And if a lucky charm in your pocket makes you feel better, I am all for it.

But if you are serious about your financial well-being it’s going to take a lot more than a lucky roll of the dice to help you meet your goals.

Below are five ways you can stack the odds in your favor and reduce the role of luck in your financial life. Hint: The last one will surprise you.

Own stocks. Money that you will likely spend within the next few years should not be in the stock market. On the other hand, money that probably won’t be touched for 10, 20 or more years should be.

Of course, there is absolutely no guarantee that the stock market will outperform other types of investments or even cash stashed under your mattress. Market corrections, bear markets and even lost decades have happened before and will happen again.

However, the likelihood of a well-diversified portfolio of stock mutual funds, index funds and etfs losing principal over a period of decades is small. In fact, the more time you have on your side, the less likely you are to lose principal.

Avoid debt. Next to taxes and inflation (two things which you have little to no control over) debt is the biggest threat to your ability to accumulate wealth over time.

It’s also the most likely thing to exacerbate financial disaster in the future. The more debt you have, the worse things will be when your luck turns sour. Having multiple mortgages, two or more care payments, or a mountain of student loan debt may seem manageable – until something goes wrong.

Paying down a loan that has a 5%, 10% or even 20% interest rate attached to it, effectively gives yourself a guaranteed 5%, 10% or 20% rate of return – net of taxes. No luck of the draw needed on this strategy.

Save more. After you pay down your debt, you will need to do something with all that extra cash.

You could spend it all on lottery tickets or at the casino. You might get lucky.

Or you improve your chances for financial success by increasing your retirement plan contribution, starting a long-term investment account, or setting aside a few dollars for college.

No matter how well your investments perform, the total return on your portfolio is rarely enough to meet your financial goals. To build your cash reserve, finance your children’s college education and generate adequate income in retirement you must save more.

Saving 10% to 15% of your gross income is a good place to start. 20% would obviously be better.

Even if you can’t start saving at these levels. Start somewhere. In the famous words of Arthur Ashe, “Start where you are. Use what you have. Do what you can”.

Minimize risk. Sometimes things don’t go your way. Hardships happen. Be ready for them by shifting, minimizing or eliminating risk whenever possible.

Own as much term life insurance as you feel you can reasonably afford. The odds of death of a particular individual are actually pretty small. However, the odds suffering a significant and permanent financial loss if you or a family member were to die are quite high – almost to the point of near certainty.

Let me share a personal story as an example. A close friend of our family is dying. I spoke to his wife not long ago and she shared with me that even though her husband has a large life insurance policy (over $500k), when you add up the lost wages, unreimbursed medical expenses, and other direct and indirect costs of being ill for a long time, the life insurance death benefit probably won’t even bring them back to even – much less provide a financial cushion for the future.

At work, figure out how much life and disability insurance you have and consider buying an more insurance, if necessary.

According to the Council For Disability Awareness 1 in 4 people in their 20’s will suffer a disability lasting a year or more before they reach age 65. More than 1 person in 20 will experience a short-term disability of 3 months or long in any given year.

Even if you consider yourself financially independent, your financial security still faces risk. One of the biggest is the risk that you or your spouse will incur long-term health care expenses in retirement.

The website,, states that the average monthly cost of care is about $6,844 a month or more. The actual figures vary based on the type of care you require, where you live and other factors.

While you might be one of the lucky ones, most people will require some level of care at some point in their lives. According to,  “Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years.”

Take care of yourself. This is really the secret sauce to financial success.

Healthy eating, regular and consistent exercise, not smoking, consuming alcohol in moderation and reducing stress will probably do more to ensure your financial success than anything else.

If you are not healthy, you can’t work which means you can’t save, you can’t pay down debt, and you can’t be a financial blessing to your family or to your community. Even if you do work, a big chunk of your income may go towards prescription drugs and healthcare.

In his book, “How Not To Die”, Dr. Michael Greger argues that most deaths in the United States are preventable and are related primarily to lifestyle.  You can learn more about How Not To Die by clicking here.

Even if lifestyle doesn’t extend your life, as Dr. Gregor suggests, it can greatly affect the quality of your life.  Blue Zones author, and local Twin Cities guy, Dan Buettner an expert on health and longevity agrees and goes even further.

He suggests that to really increase the likelihood of a long, healthy life you must also wake up every morning with a sense of purpose and maintain good relationships throughout life.

Isn’t that what it’s all about anyway?