Ray’s Take Hopefully you have a financial plan to guide you to your goals, whether they are college for the kids, a vacation home or a secure retirement. However, one of the key indicators as to whether you will be able to achieve those goals is your ability to avoid distractions from your plan.
Financial distractions take all forms, from the excitement of market spurts and the dismay when things go south to changes in your employment, health, or family circumstances. You may also be distracted by hot investment tips or get-rich-quick short cuts. It’s hard not to be, but your ability to focus can be the difference between success and failure.
Financial planning is about taking a steady, disciplined approach to your regular budget and investing efforts. It’s about looking toward the horizon to reach your goals by sticking with your plan and filtering out the day-to-day noise along the path. Sure, you may need to make some alterations along the way, as your family, job and goals evolve. Calmly re-evaluating your situation on a regular basis is an important part of planning your financial future.
However, there’s a big difference between regular reappraisals and knee-jerk reactions to market reports, China’s G.D.P., the price of oil and other short-term variations. Look at the performance of your portfolio and each of its allocations over five or 10 years instead of day to day or month to month. This gives you a clearer indicator of where you stand.
If you can avoid reacting to the many distractions that come into your life, and stick with a steady, reasonable financial plan, you’re well down the road to success. After decades as a financial planner, it’s the clearest indicator I’ve seen for the difference between an individual achieving his or her financial goals and churning with the times to little effect.
Dana’s Take I am terrible about multitasking and ending up with half-finished projects all over the house – not very productive. It’s so hard to stay with just one task at a time. The same holds true for investing – it can be boring and frustrating to stick with your financial plan. The payoff, however, is pretty wonderful.
Borrowing money is a red flag that you may be straying from your financial plan. Even if it’s rationalized as an “investment,” taking a loan from a bank or 401(k) can set you back years from your goal.
There are no shortcuts to financial security. Like the tortoise and the hare – slow and steady wins the race. Ignore get-rich-quick shortcuts. Like the tortoise, plod along the road to financial security.
It’s a challenge to remain focused, but if you stay on track with your financial plan you’re on your way to “No worries, mate.”
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker.