Staying on track is challenging. Investors face too many choices – including the lure of “almost too good to be true” solutions – that make mapping their financial plan confusing. And distractions pop up – crisis du jour – that threaten to blow us off course. Generally, it’s not a single issue such as market uncertainty – is now the right time to invest or how to adjust my 401k – but bigger issues that come into play. Let’s review some of the major reasons people get off track so that you can better negotiate decisions you may face in life.
Planning is a combination of art and science. First it must be easy to implement. Your financial life may be complicated, however, if the plan is too complicated, it won’t be executed – picture dusty blueprints for the house that will never be built that sit idly in the corner. And second, it must be based on evidence – both relevant to your situation and pass the tests of time.
More US workers are dissatisfied with their financial situation than they reported two years ago per the 2017 Global Benefits Attitudes Survey by Willis Towers Watson. This biennial survey measured 30,000 private sector workers in 22 countries – roughly 5,000 were American workers – and was conducted in August and September 2017. It represented a slight reversal of financial well-being following several years of steady growth. About a third (35%) said they were “satisfied” with their current financial situation today, down from roughly half (48%) two years ago. 34% believe that their “financial woes are negatively impacting their lives” – up from 21% two years ago. About half reported a major life event in their lives – divorce, health event, or borrowing from their 401k or payday loan. These coupled with stagnant wage growth cause worker angst.
How many of the two-thirds “dissatisfied” would improve their situation with financial planning and guidance?
Investors may be concerned about market uncertainty, volatility or whatever the current crisis du jour. They’re important. However, bigger issues deserve attention such as not having saved enough, and your overall financial health is determined by more than your cash flow. Prudent planning considers up to six or seven areas (investments, tax, insurance, business, etc.) to build and protect from a major setback from jeopardizing your and your family’s future. Thinking about the survey above, here are four ways (non-investment related) people get off track.
- Helping too much – It’s natural to lend a helping hand and see our kids and grandkids more successful than us. Find the right balance between your financial future and theirs.
- Too much debt or the wrong kind – There are smart ways to use leverage such as large asset (home, business acquisition, etc.) or super cheap car loans. However, the most financially successful have no or little debt. And payoff or fix variable rate debt including ARM mortgages and student loans – rates are rising.
- No spending plan – Know how much you can spend (and save) and budget a rainy-day fund for ‘surprises.’
- Alone at the wheel – There may come a point when a couple becomes solo. It’s hard enough to read minds, especially when one’s gone. The burden of financial decisions can be heavy resting on one. Written plans and shared passwords are helpful, as is having another to bounce ideas or think things through.
Who amongst us doesn’t prefer short cuts over long hauls, or the magical power to turn lead into gold? I think about our fascination with magic and the realities of science. Take alchemy. It tends to get a bad rap with wizards and bubbling potions. It blended mysticism and science to help men understand forces in the world, including some brilliant minds such as Isaac Newton and Robert Boyle. Over time, alchemy faded but something else emerged. Experimentation and exploration paved the way for modern chemistry. Let’s remember that fulfilling goals and negotiating life’s “surprises” takes a balance of part art and part science. Good luck.