Depending on what people think I do for a living, they expect very different things from me. For some, hearing the title, ‘financial advisor’ equates to hot stock tips. For others, ‘financial planner’ means budgeting and debt management. And since our industry offers us a fair amount of leeway with the titles we use to describe ourselves, the waters can get pretty murky. “So what do you really do?” is a fair question when somebody finds out I work in financial services.
Because of the flexibility we possess in how we serve people, I’ve spent a lot of time considering the work I actually do and the ways in which I can add the most value to people’s lives. Ultimately, I most enjoy providing clarity to the families we serve. By building financial and retirement plans, we can effectively put all of the pertinent information in one place, assess the person’s ability to meet their goals with available resources, and create a framework for decision making long into the future. This can bring a great sense of clarity and peace to those who engage in the process.
But what can you do to best position yourself for success? What’s the single best investment you can make in your financial present and financial future? I think it’s actually two things (not fair, I know). These two things are:
- Build a plan, and
- Practice impulse control
First, building a plan is what we do but only for those who choose to engage. The benefits of having a thorough written plan are many, but in particular most people thrive by having an agreed-upon track to run on. It’s also a great communication tool for spouses who don’t always think alike when it comes to money matters, which is most couples. We love building plans for these reasons. Developing, honing, and mastering the ability to control emotional impulses, on the other hand, is all you and it’s the surest way to build and maintain wealth. I know, I know…I dislike this as much as you do.
Here’s the part of impulse control that I think is most often confused. I’m in no way suggesting that impulse control is never getting that new boat, or that new truck, or the dream vacation. No, those things are why we work so hard to accumulate savings in the first place. Where impulse control can be a problem is when we find ourselves making major financial decisions without having planned them in advance or having thought through the consequences. In other words, we just did it then later wondered “Why did we do that?” And maybe we went into debt to do it.
Deferring gratification is what we’re really talking about here. Planning to do and buy great things but waiting just a bit before doing so. It’s this slight (or long) delay between impulse and action that allows us to receive the most benefit from the act without the potential regret. One example of this is called ‘walk-away power’. This power comes from having the impulse control to walk away from doing something if we deem it not in our best interest. Let’s face it; this type of deferred gratification is no fun. In fact, that’s what deferring gratification means! No fun NOW, but it also means more fun LATER. This is the big tradeoff.
So for those who are looking to build and maintain wealth, this combination of planning and working the plan is the very best investment one can make. The hot stock tip may or may not pay off, but the merits of a good plan and the discipline to resist harmful impulses rarely miss. Go ahead and buy the boat, but plan for it, save for it, and very likely enjoy it more.
All the best,
Adam Cufr, RICP®