Our mission is to help make our clients’ lives better. That is why we are here.
However, some clients undermine their own financial well being by what they do and what they don’t do. Everyone knows the symptoms, but what are the real root causes of financial failure and how can they be avoided?
Vague Goals
We stress a goals driven and planning focused approach. The problem is, however, clients sometimes have very vague goals. It is not uncommon to hear “we want a little more of this and a little less of that”. That obviously doesn’t meet any definition of a goal since it cannot be measured in either amount or time. You never know if you achieved the goal or not. Real goals need to be very specific such as “We want to accumulate financial assets totaling “x” by age 65 in order to provide for retirement living costs.” That is specific in both amount and time. Moreover, the goal has a purpose, to provide for ongoing living costs.
Unrealistic Expectations
Particularly in planning for retirement, some individuals have skewed expectations. It is easy to carry around very dated expectations about what retirement might look like and how decisions will be made. Sometimes we see clients assume that their post-retirement living expenses will decline substantially even though our experience is that expenses may rise for a few years assuming good health.
Rules of Thumb
The financial world is full of rules of thumb for almost everything. As a colleague used to say “the best rule of thumb is to never rely on rules of thumb”. For example, as recently as a few years ago, many articles on saving and investing used targets of 8-10% per year of earnings as a good “rule of thumb”. Well, that math simply doesn’t work in a time where we are planning for life expectancies into the mid 90’s. The “rules of thumb” might be off by a factor of two.
Long on Good Intentions; Short on Action
Rarely do we encounter anyone who doesn’t profess their intentions to take positive steps in their best interest towards bettering their financial future. That said, however, many clients have difficulty putting their intentions into action. This is one reason we list action steps in writing after review meetings. Good advice often requires even better coaching in order to achieve desired outcomes.