In a previous post we discussed a couple in New Jersey who wanted to know if they are “Financially Secure”. In the same meeting, they asked “What is our level of confidence that we will reach our financial goals?”
This is a very typical question. It’s a frequently asked question because clients have little knowledge or experience trying to solve this question. In addition, individuals frequently do not want to assess themselves nor do they want to deal with the uncertainty that lies ahead. I was speaking with Bob Barry, CFP founder of Barry Capital Management and past president of the Financial Planning Association. He said that clients have a negotiation between their current selves and future selves, and the future self is getting kicked in the butt. It’s just that planning is hard and it’s worrisome to think about the future, so people don’t.
Going back to our couple from New Jersey, they have 10 years until retirement; their income is $475,000 a year and have $3,400,000 in assets. And yet, they want the confidence to reach their goals.
As a financial planner, I believe there are two things you can do to address the client’s concerns. First, have a defined process for reaching one’s goals. Second, realize that the unexpected will happen and train realizing that it will be different from the plan.
As I have written about frequently, a plan is creating a personal balance sheet, knowing what you are spending now, and realizing what income you will have in the future. Lastly, the process should include what rate of withdrawal you can sustain from your portfolio. These items are the foundation of the plan. The next part is picking it apart to see where there is a hole or what could go astray.
The last and most important part is realizing one’s goals and values. This includes realizing what is important about financial independence, family financial freedom, charities, and finally, what you will pay in taxes.
Dealing with uncertainty is not fun, nor interesting. But if you ask and answer questions to that affect, then you are better prepared for whatever happens. Hiring a financial planner to coach you through these questions makes it easier and possibly enjoyable.
Wanting the confidence to reach one’s goals generally involves having a person to hold you accountable to create a plan then asking the right questions to test that plan. As a business owner, I seek out a coach to hold me accountable. Jack Beatty, Founder of Core Group USA has coached me over the years. My biggest benefits were being able to hold me accountable and I got to ask the right questions.
Are you ready to feel confident?
By James Cornehlsen, CFA
Key Words: Income, Financial Plan, Secure for Retirement, Balance Sheet, Income