It’s difficult for most Americans to cope with their financial situation. This includes a lack of retirement planning, and a lack of any overall strategic plan for their money. Many live paycheck-to-paycheck and stress over their inability to stash something away for that proverbial “rainy day.” Well-known financial guru Clark Howard says to always pay yourself first but in this day of flat income and rising prices, people usually lose out when the money is partitioned. An entire industry has risen to help people deal with their money. Financial planning started as a career in the late 1960s. It’s been a wild and rocky ride for those who want to use their money wisely and those who are charged with giving correct advice.
What is Money, Anyway?
Money is, in its simplest form, a medium of exchange. A consumer wants something that is worth more to them than the money they have. In humankind’s formative years, they would engage in some form of battle, and the winner would get the prize. This works for material objects, however, for a service, beating someone to a pulp is not going to get anyone what they want. So, the method of exchange has evolved with society. As governments came down the pike, eventually the medium of exchange within its control so entire countries could value goods and services based on a common measurement. As international trading developed, so did exchange rates. Someone can go to any country exchange their currency at a going rate. Other monetary concepts developed; as businesses began to expand, the concept of stocks and shareholders came about and the stock market was born. Some form of the mortgage has existed since we began buying houses. Money lending is as old as money itself. Other forms of monetary units, such as certificates of deposits (CDs) and money markets, arose in the latter twentieth century. Keeping up with all of this is quite the hassle.
Financial Planning
Over the years, money has separated the world into three classes: the upper class, who, whether by intention or just sheer luck, have managed to accumulate large amounts of money; the middle class, who has accumulated enough money to meet their daily needs and put a little aside; the lower class, who barely have enough to survive from day-to-day. Everybody, regardless of where they fall on the income spectrum, needs advice on how to manage his or her money and on how to use it to the best of their advantage. Financial planning has existed in informal methods as long as money has existed; bankers, accountants and tax planners have offered financial advice from the get-go. However, financial planning didn’t become a separate industry until 1969, when Loren Dunton established the Society for Financial Counseling Ethics. From this beginning, the financial planning industry was born. Bankers and CPAs are still around, but the world of money has become so complex consumers need someone who does nothing but look at financial issues to help them chart a course for their monetary future.
New Monetary Units
The financial industry as a whole has settled into a pattern: governments control the economy, backing it with their authority and regulating it through a central bank, which manages (or mismanages!) interest rates. This leaves the average citizen at the mercy of these entities. In the late 1990s, a new, decentralized currency was conceived – cryptocurrency. Most of us know this new currency as bitcoin, the most popular of the cryptocurrencies. However, figuring out how they work is difficult, and at the moment, they’re highly volatile, which prevents them from meeting a critical characteristic of money – stability.
“Cryptocurrencies serve as an attractive investment for individuals because the growing market has illustrated a strong potential for year-over-year growth and offers diversity for a portfolio. Virtual currencies are also positioned as a safe haven for investors because they are independent of the value of the dollar and government,” said Karthik Iyer, Lead Strategist of e-Chat. “As of 2017, the total volume of the cryptocurrency market is more than $180 billion and the volume of daily cryptocurrency trading exceeds more than $4.8 billion. As cryptocurrencies continue to rise in popularity, the expectations of investors have called for increased security. More and more individuals are turning towards disruptive technology that employ decentralized features – like blockchain-based systems – to prevent identity theft and protect sensitive data.”
The traditional financial world has experienced challenges dealing with this new, anonymous, decentralized form of currency. Cryptocurrencies are exactly the reason someone needs a financial planner: someone whose job involves figuring out these new forms of currency and whether or not they should be invested in. Responsible financial planners do exactly that. They advise the customer accordingly.
Money has come a long, long way since it evolved as a medium of exchange. Financial choices are confusing, and without good advice, most end up making bad decisions. Financial planners are here to help people reach their goals and avoid losing their shirts – find one to help you today.