Reaching a place of financial well-being often requires a different way of thinking about investments. Financial planning is a complex, lifelong process that people tend to approach with a numbers orientation. What rate of return do I need to reach my goal? How much insurance do I need? Can I afford a bigger house? How much money do I need to save for retirement?
To support their pursuit of the “right numbers,” people often use separate advisors — for instance, a banker, a financial planner, an insurance agent, a tax professional, and an estate planning attorney — to oversee the various components of their household wealth.
However, this “siloed” approach to financial planning can easily lead to exclusionary investment strategies that make sense in one aspect of your life, say your investment growth goals for example, but neglects to consider another equally important facet, say your taxes. Narrow investment strategies could create exposure to unnecessary levels of risk. It may also result in multiple, random investment accounts in need of consolidation. Furthermore, such an approach may inadvertently overlook crucial tools, leaving entire planning areas to chance.
Unlocking Financial Synergies
When viewing their financial goals — such as buying a home, paying for a child’s education, or saving for retirement — individuals typically think in terms of what those goals cost rather than how achieving them might affect their lives. If, however, they were to reengineer the planning process and assess their current life issues and future aspirations prior to selecting investments and asset allocation strategies, they may be in a better position to achieve satisfactory outcomes. Perhaps equally important, by putting life circumstances at the center of financial decision-making, individuals may find more meaning in their actions with regard to money.
Indeed, values have a significant role to play in determining how individuals manage their assets. This is one way in which a holistic approach to “financial life planning” enables individuals to better assess their wants and needs, establish meaningful priorities, and avoid misguided investments. As life circumstances and priorities change — and they inevitably will — so too, do financial goals. In this way, individuals employing a holistic approach to planning can easily identify and address those areas of their financial lives that are still working well and those that may be hindering their financial well-being.
Crafting a Plan
Crafting a plan that reflects your unique situation and that ties your life aspirations to your financial goals is part art, part science. To achieve this level of planning you need to rely on the guidance of a collaborative minded advisor — someone who will take the time to get to know you and your circumstances, will put together an appropriate combination of vehicles or strategies and will work in conjunction with additional financial professionals to help achieve your goals — whatever they may be.
Certified Financial Planners™ and CPAs are licensed professionals who take a fiduciary oath – pledging to put your best interests before their own. Seek professionals who have a trusted track record and can help you create a tailored plan for your specific needs. The more your professionals work together, the better your plan will make sense from every angle. When you have a plan of action that your financial planner, accountant and attorney have all blessed, you’ll likely have peace of mind that will help you to act decisively and achieve your goals that much sooner.