How do You Steer an Elephant?

I must admit that I stole the title from the Penguins of Madagascar (King Julien coined the phrase), but it is an interesting question in the financial world as well, how do you steer an elephant ?

When we are younger, and if we have managed to graduate from school or started our careers relatively Debt Free, our financial world is quite nimble and easy to control and make sudden changes if we wish, but as time passes the nimble mouse that is our Financial World becomes an overweight pachyderm (if we are not careful), hence you end up with the financial question, How Do You Steer an Elephant?

Don’t Feed the Mouse so it can’t grow to an Elephant

The easiest way to figure out how to steer an elephant, is don’t let your finances turn into an Elephant (yes, it is a trick answer, but it is the right answer).

What can make your financial world an Elephant?

• Large Debt Load: this first and foremost is what is going to turn your mouse into an elephant. If you must pay down a debt, you have many less options if a financial opportunity arises. A big mortgage is your elephant, and you will need to pay it down before you think about trying to turn it.
• Reliance on fixed income options: if you have lots of long-term GICs or fixed term bonds, your ability to quickly change directions is hindered. If you have chosen this type of investing strategy, you like the direction the elephant is going, so turning it isn’t really going to matter much.
• Creating a figurative elephant: you may  over invested in your employer (i.e. you have a pension, stock options, a stock purchase plan, a bonus plan and your salary), and you may not know you even own an elephant, but you do (financially). Diversify away from your employer (unless you are sure you are working for the next Google (I thought I was when I worked for Nortel, so be careful)) and your elephant can become more nimble.

Financial Poachers?

Also remember that Financial Elephants can be victims of Financial Ivory Poachers (now there is an expression you don’t see every day). There are folks who would try to convince you to steal your financial Elephant:

• Folks that will “buy” your structured settlement or set income vehicles.
• Companies that will loan you money on the basis of your fixed income vehicle
• Reverse mortgages for paid off homes.

Don’t let the financial poachers steal your financial elephant (or it’s tusks), just slim it down a little.