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The importance of being earnest

August 31, 2011 Blog 1 min read

August was a tumultuous month in the capital markets, marked by steep declines in the Dow Jones—more than 500 points on August 18— before rising again, putting it within half a percentage point of breaking even in 2011 at month end. Investors are understandably concerned by this erratic performance, and they look to those they trust for answers. As Plante & Moran’s managing partner, I field a fair amount of these questions, and I thought it made sense to offer my point of view here.

“Even in these uncertain times, we believe in the importance of being earnest and maintaining a balanced approach within the context of one’s stated risk tolerance.” This quote from Jim Baird, taken from the most recent Plante Moran Financial Advisors “Market Perspectives,” accurately sums up my thoughts on the matter. The importance of a long-term plan cannot be overstated, and it’s important to stay true to that plan regardless of the ebbs and flows of the market.

An integral part of a long-term plan is a personal balance sheet—a summary of all of the assets a person owns and their titling as well as an overview of one’s liabilities or debts. For a business, having an up-to-date balance sheet is expected; it’s the starting point for most discussions and decisions. However, many of these same people who understand the importance of a business’s balance sheet neglect to approach their personal finances in this manner.

Members of Plante & Moran’s Wealth Management Industry Group recently sat down to discuss the importance of having a personal balance sheet and how that balance sheet encapsulates everything from investments and estate planning to taxes and insurance. They also offer up a tool to help individuals get started in developing a personal balance sheet of their own. I think you’ll find it interesting reading in these challenging times.

What about you? What is your outlook on the economy? How do you approach these market fluctuations? And what are your thoughts on using a personal balance sheet to help you reach your ultimate financial goals?

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