Apr 01

Seeing the Forest for the Trees — With a Cohesive Set of Financial Values

By Glen Cesari, CFP® | Wealth Advisor

The yearly ritual of Americans filing their taxes is an annual financial rite of passage. As we pour over reams of financial information, we are forced to confront the past year and our current financial situation. Often, this time of reflection has people wondering in the short term:

  1. What can I do to mitigate high taxes?
  2. How do I combine and coordinate multiple financial accounts to work toward worthy goals?
  3. Which of my accounts/assets have performed over the last year and which are simply a distraction?
  4. How have my assets contributed to achieving my household goals over the last year?

On a more strategic planning level, the above questions can then bring about the next round of questions:

  1. Are my financial goals realistic?
  2. Are my goals prioritized correctly, and am I addressing these goals effectively?
  3. How are disparate approaches to finances within my household resolved?

At first glance, these questions seem like they should be straightforward to answer but the complexity of money, the uncertainty encountered at each stage of life and the sheer number of choices available for addressing a single goal quickly come into conflict and unravel our best efforts to finally get our financial house in order. This is where having a cohesive set of financial values plays a critical part in crafting your personal financial plan. Then, once your plan is in place, it’s important to have a stick-to-it mentality as you work toward achieving milestones as safely and efficiently as possible.
 

Start Planning With These Basic Principles:

1) Prioritize your goals – Generally, prioritize by the difficulty of fully achieving the goal. Start planning with the most challenging goals first. Financial planners focus on retirement because of the potential length of time spent in retirement, amount of assets required to support a long retirement and the multitude of variables that could negatively impact retirement.  

2) Understand the options and consequences of each goal – For example, eight years of private college for two children might mean working longer or decreased savings entering retirement. That option may have the consequence of moving to a lower cost of living area during retirement to compensate for the extra expenses. That might be a happy concession for some families, but for others it may not be as palatable.  

3) Agree to a course of action and avoid distractions – This sounds deceptively easy but committing to a plan may feel daunting. Working with a knowledgeable financial planner can help make the process less intimidating. Also, understanding your own financial behavior — especially avoiding pitfalls like chasing returns, reacting to market volatility and making major changes based on the noise inherent in the modern news cycle — will significantly increase the potential for financial efficacy.  

As you finish your taxes this spring and participate in your own version of financial existentialism, hopefully this article reiterates what many studies have repeatedly demonstrated: the cornerstone of long-term financial success starts with crafting a sustainable long-term financial plan — based on a core financial philosophy — then staying the course with dedicated saving and disciplined investing.      

Sources:
Vanguard Advisor’s Alpha, https://personal.vanguard.com/pdf/ISGAA.pdf
NBER Working Paper Series, Individual Investor Mutual Fund-Flows, Ivkovich Z., Weisbenner S., https://www.nber.org/papers/w14583.pdf
Securities offered through LPL Financial, member FINRA/SIPC. Insurance products offered by LPL Financial or its licensed affiliates. Investment advice offered through Northwest Financial Advisors, a registered investment advisor and separate entity from LPL Financial.
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Author
Glen_Cesari

Glen Cesari, CFP®

Wealth Advisor

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