Step 1 – Prioritize: No matter your wealth, everyone has limits on what they can do. In order to maximize results that best support your goals, you need to simply start here with identifying those goals. This sounds basic, but people hate doing this. It takes time, slows the buying process, takes effort and it is not emotionally satisfying – at least initially. But when you are done, the peace of mind that results from knowing where you stand in relation to your goals is worth the effort.
Step 2 – Assess: Now that you have your goals and priorities nailed down, it is time to see what you can “afford” on that list. Gather the list of assets, liabilities, expenses and income sources and start to figure out what works and what does not. OK, people really hate doing this – this is where desires meet reality. Everyone knows their limits somewhere in the back of their minds, but this is where it is confirmed. The good news is that this is the area where you can really gain clarity.
Step 3 – Uniqueness: We are all different and, thus, our planning should account for that. How are family dynamics, your health, work situation and so forth? What is “right” for your neighbor may not be the same thing that works for you.
Step 4 – Landscape: We are not talking about vegetation but rather the economic, market and business climate that surrounds us. When making financial decisions, the quicker people realize that they have limited control with many of the moving parts, the better frame of mind they will be in. We have reviewed thousands of financial statements and tens of thousand of investments. We have seen many people under the delusion they were in “control” only to lose it all.
- “I know everything about my real estate.” They go into foreclosure because they over-leveraged.
- “I know everything about my company.” We see the stock plummet 90%. Humbling and costly.
- “We track these companies and know them intimately.” Then why did your portfolio lose more than the market?
Understand the climate you are in. That will dictate virtually all your success or failure.
Step 5 – Solutions: Now you are putting steps 1-4 together and coming up with solutions that make sense for the “total” picture. You guessed it: we took the “emotions” out of the process – or at least as many as we could. Yes, we took the “fun” out as well. This process does not allow for the adrenaline kick that comes with making highly charged emotional decisions. And that is the point! Are decisions best made in calm, well thought out settings or ones dictated by adrenaline?
Step 6 – Implement: Now the easy part. Put the plan into action. But don’t let it run on cruise control, you have to circle back to “Step 1” at least once a year. We find that most people only do this exercise a handful of times over the course of their entire lives, if ever. You should be doing this EVERY year and not only at times of crisis. Unless you don’t want the best chances of reaching your goals. The world is full of surprises, and most of them are not necessarily pleasant. Start accounting for that.
Previously published in the Daily Sound.
About Mission Wealth
Mission Wealth’s vision is to provide caring advice that empowers families to achieve their dreams. The founders were pioneers in the industry when they embraced the client-first principles of objective advice, comprehensive financial planning, coordination with other professional advisers and proactive service.
Mission Wealth does not sell any internal products; therefore, the firm’s recommendations are solely in the client’s best interests. Mission Wealth’s holistic planning process helps clients enjoy greater peace of mind.
Mission Wealth is a Registered Investment Adviser. This commentary reflects the personal opinions, viewpoints, and analyses of the Mission Wealth employees providing such comments. It should not be regarded as a description of advisory services provided by Mission Wealth or performance returns of any Mission Wealth client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Mission Wealth manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
