Many people invest like they are hungry and driving around aimlessly looking for a place to eat. Sure, you’re likely to find a place but it may not be the best choice. When you make investment decisions, you need context. The process of creating and updating a financial plan based on your values provides this much needed context. It’s not just a “nice to have”; it’s a “must have”.
Not everyone walks around with clear and concise long term goals. However, we all know the values that we find most important. Outlining your ideal life through the prism of these values is a good starting point to creating goals.
Investing without context is at the top of the list of investing perils purposefully. Making random financial decisions is not just wasteful; it actually dilutes your resources and robs you of your ability to focus on what’s really important.
Financial plans built around values provide you “freedom” to ignore most of the investment “opportunities” that arise because these likely don’t move you in the direction of wealth wellness. Just because something might be a “good investment”, does not mean that it is a “good investment” for you.
Peril # 2- The Push For Returns
This is closely tied to # 1. Without context, you have a tendency to make “instant choices”, decisions that might appear good today but not so good tomorrow. Many investors believe that the answer to all that ails them financially can be “cured” by better investment returns. They reason that these better returns will help them make-up for lost time. Chasing investment returns is a very dangerous strategy because it fails to recognize the relationship between risk and return.
Many financial planning “injuries” start with mental errors. Chasing returns usually creates poor investment decisions; these poor decisions lead to other errors and that compound into chronic financial planning problems. Yes, your investment portfolio should accrue reasonable returns beyond inflation (after all that is why you invest), but returns alone are not what will make or break your financial future.
Investments are just vehicles for moving you from one place to another. Where are you currently along The Wealth Continuum? Remember, the objective is to have planning possibilities. Ready for a real conversation?