Financial planning is primarily a positive, future focused activity. The entire process should be enjoyable. There are plenty of times, however, where our role is to stand between our clients and big mistakes. We want to keep clients from injuring themselves financially. Many personal financial “injuries” originate with mental errors. A momentary loss of focus; a poor choice; a lack of clarity; all of these can lead to big mistakes.
None of us are perfect and we can’t expect to make perfect decisions all the time. We do, however, need to avoid substantial mistakes that can alter the trajectory of our financial future. We are blessed to work with a number of very smart individual clients. The presence of intellectual heft, however, does not alter the fact that all decisions contain emotional components. Emotions and the behavior that flow from these emotions are where the real problems arise.
One of the underlying reasons behind financial mistakes is our inability to grasp the connection between our past and our future. Our past almost surely was a mixture of both good and bad events; decisions that worked out as expected and many that didn’t. For some reason, many individuals believe that their future will contain only choices that unfold exactly as planned. This doesn’t comport with the past and isn’t grounded in reality.
Financial planning should contain a broad expression of your values and aspirations (goals). Everyone doesn’t walk around armed with a concise list of clear long term financial goals. A good place to start is to think about your ideal life; What does it look like? How is it different from where you are now? What can you do to take steps towards that goal? Becoming really clear about your goals is the best protection against making serious, lifestyle altering mistakes. Once set, these goals need to be regularly reviewed against the backdrop of actual results and circumstance changes. Ready for a real conversation?