Stay Away from These 5 Sins!
Retirement is all about objectives, in my opinion. This is the ultimate quest, in a way: if you plan it the right way, you get to reap the results of your efforts and planning.
If not, you struggle to find ways to fill the gaps. There are two things you need to be the most mindful about: first is knowing how to prepare for your golden years, and second to make sure nothing gets ruined in the meantime.
Today we will talk about some of the greatest mistakes you could potentially oversee, and how to carefully avoid them. In the end, it’s all about having a good time knowing you have more than enough.
Not setting a clear purpose
This issue plagues so many investors and wealth managers out there, it’s crazy. If you just go on and prioritize money before any meaning, how are you expected to succeed? After all, you haven’t even identified what success means to you.
At the core of every significant endeavor lies a bigger purpose, a deep-seated driver that gracefully shapes our actions and decisions. Psychological and social sciences provided a good amount of understanding about human motivation, placing emphasis on the power of emotions in driving our choices.
Every person harbors one of four “power emotions”, and that would be happiness, contentment, success, and of course, fulfillment. Ideally, these should dictate how they manage their wealth.
One of the best ways to “start with purpose” is to identify that power emotion, then slowly include it in a personal statement of financial purpose.
Here’s a great example of a person with a strong emotion of happiness: “I am happiest when I get to spend time and resources with my family, engaging in experiences related to wine, water, and music.”
It might sound cheesy, but this statement does so much more than outline a lifestyle. It sets a very clear direction for financial planning and goal setting.
It’s not so much about accumulating wealth, but more about using your wealth to enrich your life and the lives of those you care about. As a goal, it also carries emotion in a way that “retiring at 65” could never.
Crafting the right statement of financial purpose also implies an intricate discovery process, not just a simple articulation of something you already know.
It’s fine, you can take your time with this. Because here’s the thing: this, not the money, is the true foundation of long-term success and happiness.
Starting for your destination without zero guidance
You’ve already set a compelling destination, articulated in your statement of financial purpose. Now, what you need is a plan for how to get there. Otherwise, you’re only daydreaming.
A plan needs to be more than a map. Static information isn’t enough. You also need active guidance that will stay true to your purpose. I mean, imagine sitting with a close friend and confidant and finding yourself sharing your statement of financial purpose: “You know, what
I’m really all about is spending time with my family around some types of experiences, such as music.” Wouldn’t you want your friend to call you out on that, would you?
Because then the question would be, if that’s really what you want, is it also what you’re doing? Because you had the chance to take your daughter to a Taylor Swift concert in NYC and you didn’t.
And that’s a good friend right there, pointing to something humans tend to do all the time. We get quite clear about our purpose, then we let life and business get in the way of our plans, and we do nothing about it.
This is where the best financial advisors will help you. They understand your goals. They know your destination, and provide the proper guidance along the way.
Not making cash the king
What you do with your cash is only one of the two focal points of leading your best life. Just ask yourself: “Am I spending my money consistent with my purpose?” (The other focal point is time: “Am I spending my time consistently with my purpose?”) These focal points are crucial to any financial plan.
A good plan guides your spending: both on what and when. Then what you need is good alignment. According to an old Harvard study, people, regardless of their generations, are happiest when they spend their precious time and money on things that truly matter to them. Imagine hiring a biographer to chronicle your life.
The biographer also has access to your credit card statement and your calendar. Would the story he or she would write based on those sources be consistent with your true purpose?
To be faithful to it, you also need to hold yourself accountable for alignment. Naturally, that’s easier said than done.
Letting dollars be lazy
The positive corollary of this mistake is the well-known budgeting phrase “every dollar needs a job.” Your financial plan should outline who, what and when money is for.
When you do this, you could discover that you’re not saving enough. This is one of the biggest concerns for most clients. “Am I saving enough to retire comfortably?” Saving and investing could require delayed gratification.
There’s also something else to consider: you’re not dreaming big enough. This could turn out to be quite uncomfortable. In fact, many people understand what their financial plan could accommodate.
This might be due to the fact that most people experience losses with twice the intensity of experiencing gains. It could also be because they’ve made delayed gratification a habit, which then would morph into a belief that delayed gratification is what good and smart people do.
However, you shouldn’t let shame or fear make decisions for you. When you start with a clear purpose, and when you establish a very clear plan for spending and give your dollar a job, you can also rest easier knowing you’re on the right path for living the best life you can.
Assuming investments are the end rather than the means
Investing shouldn’t be seen as a sport. It’s also not something you do for its own sake. It’s something that helps you fulfill your financial purpose.
And for that – and not because of anything the financial media or investment industry would say, investing is very important. Solid investment performance also means you can fulfill your objectives more fully, whatever they are.
That’s just common knowledge. So make sure you think about investing in the context of your own purpose. You’re not investing to compete or compare with anyone.
You’re only investing to help accomplish what you want to. Also, think about what this means for investment risk and return. You might discover you can fulfill your dreams while taking less risk than you are right now.
In this case, it’s our sole responsibility as advisers to help you do that. Maybe you will discover you want to take a little more risk to dream a bit bigger.
That would also inform our actions as advisers. Investing doesn’t have anything to do with comparing a line on a piece of paper with another line on the paper. That would instantly be an end in itself. But investing is a means to achieve something far more personal and real.
Naturally, there’s much to know about this topic, so here’s a great series to get you started!
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