If you were to create a list, in order of importance, of the different parts of your life, where would “getting your financial shit together” fall?
If you’re like most of us, building a sound financial house is probably near the top, especially if you have a family that relies on you. Unfortunately, our behavior rarely matches up with our intentions, and we all know good intentions + no action = road to hell, right?
Recently, I had a discussion with a client about why this happens. We all know it’s really important to get our money and investments in shape. We also know how important it is to prepare for the worst with insurance and estate planning. But it’s so easy to kick the can down the road. Why? Because it’s challenging, a little nebulous, and for some of us retirement and even saving for college feels “far away.” (I’m defining that as more than a few years). And damn are we busy! We are busy putting out fires that need extinguishing today. In other words, if decisions can be delayed, they will.
I’m here to remind you of a simple, important question. How long has it been since you reevaluated your long-term goals and honestly faced your current financial state? Too many people wait until they have more time or more money to prioritize their finances, but if you wait too long, you’ll never have enough time or money.
Your finances are arguably one of the most important parts of your life. Your investments and financial plan are like the base of a pyramid that makes all the other wonderful things in life possible. Now is the time to push them up on your list.
No more excuses.
Where Are You At?
What’s the point of creating strategies and plans for our lives? Because without a plan, you’re shooting at a target blindfolded. And trust me, no one will want to be around you if you’re doing that!
A simple investment philosophy is what we need to help us set our course and keep our goals at the forefront of our minds as we work towards them. Life is short. Get on track today so you can stop worrying about tomorrow.
Are You Saving Enough?
Did you know that while approximately 96% of pre-retirees and 89% of retirees are concerned about their financial future, only 50% meet with a financial advisor to discuss their situation?1 Meeting with an advisor not only helps to give you confidence and peace of mind, it also provides real results!
The data presented in an HSBC study on the future of retirement shows that those who met with an advisor amassed nearly 250% more retirement savings than those without a plan.2 It’s a no-brainer.
What about you? Are you saving enough? Here is a simple tool to see if you are saving enough for retirement.
Are Your Investments Working As Hard as You?
Investing can get complicated. But it doesn’t have to be.
Investing is an ideal way to maximize what you have and, and as a result, be more efficient with your money. Invest in a strategy that is backed by science and cuts back on fees. When you add an advisor to your financial support team, your hard-earned money will grow smarter and larger.
In fact, Morningstar has quantified the value of a financial advisor as “Gamma” and how it can add more than 1.5% “alpha” to your wealth3
We showed that each of these five gamma components creates value for retirees. When combined, they can be expected to generate 23% more income on a utility-adjusted basis when compared to a naïve strategy. This additional income is equivalent to an arithmetic “alpha” of 1.59 percentage points. We called this gamma-equivalent alpha, and it represents a significant potential increase in portfolio efficiency (and retirement income) for retirees. How many portfolio managers deliver 159 basis points of alpha year in and year out?
Are You Too Risky Or Not Risky Enough?
How much stress is our crazy economy giving you? We can do our part, working tirelessly to save for retirement and hoping our investments grow, but what if your portfolio isn’t in line with your risk tolerance?
Research shows that four out of five investors have more risk in their portfolio than they realize. The result of too much risk is that you end up in the line of fire when the market goes sour. But if you swing too far to the other side and end up with far less risk than is right for you, you may be in danger of falling short of your financial goals.
Your risk preference is going to be different from your best friend’s or your brother’s. It is based on your unique situation and personality. Trust me, you want a portfolio that reflects you, not the “average investor.”
Are you unsure where you stand financially? Do you have a way to see all your investments in one place, even your 401k accounts, 529 college savings plans, bank accounts, mortgages, etc? Don’t be part of the majority who worries about their financial future, but isn’t aware of where they stand financially or doesn’t take action.
As cheesy as this sounds, I urge you to make 2017 the year your finances begin to thrive. Shameless plug here: the best way to make this a reality is to schedule a quick 15 minute phone call with me to see where a few small, tactical steps could lead to big improvements in your finances. You won’t get sold anything but real advice you can actually understand.
It could be the best 15 minutes of your (financial) life.
For many people, a 401k is their largest retirement account. It deserves your undivided attention. Download our Ultimate 401(k) Guide for a step-by-step strategy to master your 401(k), including a prioritized checklist. It’s free!
Pathway founder and principal Greg Brown is a fee only financial advisor with broad financial planning and investing expertise. Greg’s financial advice has been featured in publications like Yahoo Finance, Bankrate, Investopedia (all articles here), Wall Street Journal, and USA Today. He holds a master’s degree from the University of Chicago and a mechanical engineering degree from Michigan State University. Prior to Pathway, Greg was a lead analyst at Morningstar and previously held engineering roles at Dell (including a US Patent).
Also published on Medium.