At Grand Wealth Management, we firmly believe that investment management and financial planning go hand in hand, and that one without the other can result in less than effective financial decisions. We often meet individuals who have focused on selecting the “best” investments or managers but have neglected to ask the crucial question: “Which investment (or manager) will go further toward helping me achieve my goals?” Even worse, many of these same individuals are apparently willing to invest their money without having first set their financial goals.
In fact, one of the most serious blunders you can commit in your financial life is making important financial decisions without having a “big picture” strategy in place to coordinate all your goals. Success at building security begins with laying a solid foundation in the form of a comprehensive financial plan. And people with a written, comprehensive plan are more likely to be satisfied with how their financial affairs are being managed, according to a 2004 survey conducted by the Certified Financial Planner Board of Standards.
Imagine this scenario. You’ve decided to take a trip around the world, but you have limited funds and only three weeks to travel. If you were to embark on your trip with no itinerary whatsoever, you’d put yourself at risk of running out of money and missing out on high-priority destinations. Wouldn’t it make a lot more sense to map out your journey in advance? Similarly, before you decide to invest in a particular fund or security, buy an insurance policy or otherwise take action in pursuit of a particular financial goal, you need to plot a multi-point route toward all your goals.
Let’s assume you’ve decided to start planning for retirement. At some point, you’ll need to ask yourself questions relating to your hopes and expectations for that life stage, such as when you’d like to retire and how much income you’ll need versus how much you’re projected to have. But before you spend too much time on such questions, it’s imperative that you use a wider lens to view your entire financial life, not just your retirement. To begin with, you need to address issues like:
- What’s the current state of your finances?
- What are your priorities in life? (Your children? Travel? Maximizing wealth? Anything else?)
- What are your short- and long-range financial goals?
- What are your attitudes about investment risk?
Like everyone, you’re bound to have multiple goals that are all intertwined and competing for your attention and your funds. A comprehensive financial plan will allow you to prioritize goals and work toward all of them simultaneously. You will be able to revise the plan as your life and priorities change, keeping an eye toward how your decisions regarding one goal will impact other goals. And along the way, you will always be able to monitor your progress toward getting what you want out of life.