Step One — Strong Foundations
Times have changed as they always do. What was true for those of my generation may or may not be true for those that follow. The generational gaps that we are seeing today seem to be much more pronounced than ever before in our nation’s history. Whether it’s due to a shift in popular thinking or the advent of technology and the enormous amount of information and data points we have at our fingertips is better left to another blog on another website. But I say this because there are certain things that have not, and in my estimation, will not change.
This is the purpose of this series of blogs. So let’s begin, shall we?
Setting the Foundation
I’m not a very handy person. I can fix the random doodad that needs tightened or fill something with gas and change the oil, but much more than that and I am calling someone with a better pedigree than myself. That being said, I understand the need and the function of a solid foundation when you are building something.
I was first introduced to this concept at Sunday School when our teacher would tell us about building your house upon the rock instead of sinking sand. For those of you that may not have had the opportunity to learn this concept, essentially what it means is that if you build your house upon a shifty, non-stable foundation, when the storms of life come crashing in all around you, your house will crumble. If, however, you build your house upon a solid, stable foundation (rock in this case), your house will stand and you will weather the storm. This concept is certainly true of your financial life.
So what is a solid foundation as it pertains to your financial planning? Great question.
1. Time — We see clients of all ages and seasons of life come to us at the beginning stage of planning. Ask any financial planner when you should start planning and universally they will say “As soon as possible.” As a profession, we are much better equipped when we have the benefit of time. So if you haven’t begun to plan, please let this be your clarion call to start. Give your planner and yourself the time needed to effectively plan your financial future. So the first step in setting a solid foundation is allowing yourself enough time to plan.
2. Mindset — Most people wouldn’t believe how important a client’s mindset is to the overall success of the planning process. We all have experiences and histories that lead to ideas and opinions. They’re part of who we are. Unfortunately, some of these things can lead to unsuccessful outcomes when dealing with a financial planner.
Like I said earlier, once i’ve reached the point in which my mechanical aptitude has run its course and I concede that I cannot fix something that needs attention, I call someone that can. Someone much more qualified.
This should be true of you as well when you are searching for an advisor. You are looking to meet a need that you cannot meet on your own. If a person does their due diligence in finding a planner, they should feel comfortable delegating this portion of their life to that professional. Now understand that this is a process for most people. It may take some time in order for someone to get to the point where they trust their advisor implicitly, but in my mind this should be the goal of the relationship. It will be much, much healthier for both parties once this is true.
Learn to rely on and lean into the advice you are given. This is something that we cultivate in our firm. We advise our clients which will normally lead to a healthy conversation until everyone involved is satisfied. All of their questions have been answered and if it makes sense to everyone, we move forward. If not, then we continue the discussion until everyone is satisfied that the advice given has been clearly understood. If it has and the client still declines to move forward, then we don’t. Ultimately it is the client who decides, and when the decision is made after a healthy conversation, we as advisors are usually content that our clients have made an educated decision. And that’s the most important part. The client is educated.
3. Discipline — My dad started telling my brother and I about the power of compounding interest at an early age. Unfortunately, I was strong-willed and rather undisciplined with my finances when I was younger. I wish I had listened to him back when I started working at the age of 12 at the boat club along the Allegheny river. Alas, I did not. It wasn’t until into my 30’s that I began to re-visit the wisdom of my youth and began to plan in a meaningful way. One can only imagine the money I have lost by not planning and saving earlier.
There are those that will read this that are just starting out on their career paths and others that have walked down the corridor of time and are looking to a retirement date in the not-so-distant future. Regardless of where you find yourself within that span, know that discipline is as important to you as it is to anyone else. It may look different depending on where you are on that spectrum, but it is still essential.
For the person just starting out, discipline is going to be about two things. First, commit to the process. Make it a priority so that when the time comes to meet with your advisor and take the necessary steps and make the necessary changes, you follow through. If you stay consistent and cultivate the relationship with your planner, you won’t regret it. Of course, make sure you are working with a planner that desires this as well. We often hear stories of absent planners that seemingly have zero interest in this type of relationship. Find another advisor.
The second piece to this discipline puzzle is saving. Saving, saving, saving. This can take many forms and through many different vehicles such as 401K plans, IRAs, savings accounts, various securities and bonds, etc. The bottom line is that saving is an absolute must and one needs to find a way to make sure it happens. This could be utilizing your employer’s retirement plan and having them take the money out before you even see it. Or it could be an automatic withdrawal from a checking account into an IRA. Whatever the means, become disciplined in your saving. No amount of planning can make up for a lack of saving for your future.
For those individuals that are relatively late in the planning game and are looking to retire within the next 10 years, discipline may look similar in shape but have a very different complexion. What I mean by this is that all of the things that I have just listed are still true. You will need to make the most our of the time you have remaining before you take your last paycheck. Your mindset will need to be in alignment with what it is your are attempting to accomplish, retire on your terms. And, of course, you will need discipline. You will need it when it comes time to tell your kids ‘No’ for something that they want/need so that you can put that money into your accounts for your future. You will need it when you want to take a vacation to get away from the stresses of life. You will need it for many different reasons, but keep in mind that the ball is on the 20 yard line and there’s only about 5 minutes left in the game. It’s time to ratchet things up and lock things down. So all of these things are true for you as well, but the tone and the pace are heightened. Things need to be brought into crystal clarity as your approach your target date
These are just three of the foundation stones upon which one should build their planning ‘house’. While few in number, they are very important and if done well and with deliberation will serve you in setting the proper course.
In my next guest article I will be going into what the next stage may look like. How does one navigate life while weaving in the complexities of future planning?