For most folks who plan to engage in a financial planning relationship for the first time, common thought processes and expectations often form around how much you need to retire, what the markets are doing, how to take distributions, etc. It’s what our industry brands as what to expect. All important for sure. However, as someone who may be familiar with our firm, you may also receive questions that have nothing to do with any of that. One of our favorites to ask early on is “what money was like growing up”.
Picture this. We have a couple who comes into the office. They may come from very different backgrounds. One may have grown up on a farm and one in the city. One may have had no money at all and the other may have come from a well-to-do family. Not only that but each family has historical patterns in how they think about money as well, no matter how much they have. Some might believe in saving first, another may think living life to the fullest is most important. Those beliefs are instilled in us at an early age, and we often take them and build our own longer-term beliefs throughout our lives. So, when you have two people who are preparing for a life together, or those who have been together for a long time, it can become extremely important to have this knowledge about how we think about money.
But isn’t all this “what was money like” stuff just touchy-feely? Can’t we just get to the facts and talk about investment returns, to make sure we don’t run out of money? I guess we could. However, there are two reasons why we choose not to. First, when a couple or family works together, it can be extremely important to have an understanding about where everyone comes from. If one is frugal and the other is just the opposite, this can lead to friction. Doing the analysis can prove invaluable. Second, when we work with people to determine their goals, objectives, and risk tolerance, understanding how people process investing emotionally helps us focus in on that personality profile. For example, what do they do when things become volatile? Let it ride or freak out? Do they worry about money scarcity as they plan out their retirement years, thereby not taking advantage of all they worked for? Do they want to leave money to their heirs or spend it all? This information gives us the data to make a road map that fits best with each person.
Personally, providing both the solid analytical planning side as well as the emotional analysis portion of all things money provides what we believe to be the biggest opportunity for success. It gives confidence in the data as well as an understanding of “the why” as it relates to how we make the decisions that we make. This can be some powerful stuff when done in a comprehensive manner.
Investing involves risk. No investment strategy can guarantee positive results. Loss, including loss of principal, may occur. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results. Diversification is an investment strategy that can help manage risk within a portfolio, but it does not guarantee profits or protect against loss in declining markets.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. (C) Twenty Over Ten