Why Age Shouldn't Matter When it Comes to Financial Planning

Why Age Shouldn't Matter When it Comes to Financial Planning

We live in a time of great personal freedom when we have the opportunity to choose our own life goals and paths.
 

While it’s true that very few 26-year-olds are likely to be retiring, you might be that lucky one who just sold an app to Facebook and is considering philanthropy. While most people start families in their 20s or 30s, you might be that 40-year-old who’s just about to adopt a first child. And while most 60-year-olds have hopefully accumulated some retirement savings, you might be that entrepreneurial baby boomer who is moving to Detroit to launch a startup or open a coffee bar.

In spite of this brave, and exciting, new world of personal choices, what’s the first question a financial advisor or online financial site generally asks you? Chances are it’s your age. Then that answer determines the next question, and the next.

Too many financial planners and investment sites, unfortunately, use age to make assumptions that then dictate investment recommendations.

The internet, too, is filled with articles like “Financial Planning Tips Every 30-year-old should know” and “The best financial goals for every age.” There are books and studies that break your life down into age-based phases like “early career phase” and “peak accumulation phase” then make generalization based on those neat buckets.

What’s more important than age?

We’re all individuals, with different dreams, goals, and life situations and when it comes to financial planning, age is not as important as it used to be.

Your goals and your risk tolerance should be the factors to consider first in devising a personalized financial plan or investment plan that works for you.

Is your primary goal buying a house, is it wealth creation for early retirement, is it having income so you can bike around the world for a year? Those answers are more important than the fact that you are 32.

Does a volatile stock market make you anxious? Do you prefer slow and steady to winner takes all? While it’s generally assumed that young people can afford greater risk and volatility because they have time on their side, you may be that 24-year old that wants or needs to preserve savings first and foremost.

Goals differ and investment always involves a certain amount of risk. That’s why a fee-only fiduciary financial advisor works with each client individually to manage goals and risk in a way that works for them. It is vital for success to determine the level of risk each client can afford to take, how much risk is necessary to help them achieve their personal goals, and how much risk and volatility they can comfortably live with emotionally.

You Are Unique
 

Each of us is unique and that means that no two people will have the exact same goals + risk profile, in spite of being the same age. Yes, living off retirement savings is different than living off a first salary, but the amount may be the same. And paying off student loans is really not all that different from paying off a mortgage.

What’s important is that you find a good fee-only fiduciary financial advisor who looks beyond pre-programmed, one-size-fits all recommendations for 20-30 year-olds or 60+ year-olds and focuses to your goals, your risk preferences, and your uniqueness to create a personalized plan that works for you and evolves as you evolve, not one designed for an entire generation.

Brad Sherman
Advisor
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Brad Sherman is a financial advisor and the founder and president of Sherman Wealth Management, LLC, an independent, fee-only, boutique Registered Investment Advisor that make ... Click for full bio

When it Comes to Your Money, Does the Truth Hurt?

When it Comes to Your Money, Does the Truth Hurt?

“We’ve been arguing about this for year, and here we are in our 50’s. It’s time to stop!” Laura said empathically.


Paul’s downcast eyes and silence spoke volumes.

Laura continued, “We’ve worked with several advisors who have tried to help us invest our money in a sensible way. Then whenever the market goes down, Paul calls the advisor and tells him to sell everything! In all these years, no matter how much we work to build our financial security, we’re always playing catchup.”

Her words hung like a rain cloud about to burst when Paul began to speak. “I know, I know. I just can’t help it. I get nervous that we’re going to lose all our money. When the market goes down, I scramble—in my thoughts and in my actions. The driving force behind it is: At least if it’s in cash, the balance won’t go down.”

This is the moment where I felt I could lend my advice. First, I needed to learn about this particular couple and their values. Then, I could begin helping them take control of their finances.

“Tell me Paul,” I said. “What did you learn about money growing up? What messages did you hear as a child about money? From your father? From your mother?”

Paul’s eyes moved up and to the left, indicating his mind was reaching for memory. “My parents never talked to us kids about money, really. The one thing that stands out is my grandfather talking about The Great Depression and how it was such a tragic time. My parents both worked, but they never made a lot of money. They fought about money sometimes.”

“Any other memories about money?”


“Actually, yes. I remember when my father took me to the bank to open up a passbook savings and how exciting it was. The bank manager typed the passbook on this old manual typewriter and gave it to me. He showed me how the interest on the account added to the amount I deposited. I felt very grown up that day! But I guess that was the sum total of money training from my parents.”

“Can you help me understand how you and Laura make financial decisions?”

The question couldn’t be more impactful if a boulder had landed on his head. While Laura looked at Paul with a mildly accusatory glare, Paul searched for something to say that would keep his well-conceived protective fortress from crumbling. I interjected to ease the tension. I could feel the guilt in the air.

“Let me frame that another way, Paul and Laura. We all do the best we can as we live our lives. Let’s face it, our lives are filled with responsibilities in our families and our jobs, not to mention outside interests, health, and friends. While financial issues are important, unless you either have the knowledge and experience—or the help, most people avoid getting too deep into the confusion of managing their finances by doing the very least they can. What we don’t know scares us. So we defer, delay, make rash decisions based on our lack of time, knowledge, desire. Add a dash of fear to that equation, and you have a formula for financial problems. I want you to know, you are not alone. It’s more common than you could even imagine. The question is, do we allow the truth in so that we can move forward?”

It’s important to admit the truth behind our actions in order to rectify past and future mistakes or regrets. Living in denial only perpetuates making decisions that could potentially lead to financial disaster.

“I hate to admit it,” Paul said. “I guess in my desire to protect Laura from stress, I’ve made decisions that have hurt us, and I’m sorry. Michael, you hit the nail on the head. You defer, avoid, and allow your emotions to take over. And as a result, bad stuff happens. I think I’m ready to ask for help.”

Laura’s expression softened, and said, half-kiddingly, “You think?”

Michael Kay
Advisor
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I founded Financial Life Focus because I wanted to work with people who put your success at the forefront of everything they do; people who understand that finding balance is ... Click for full bio