Having the right map is paramount if you want to arrive at your destination. Navigating the high seas and distant lands requires a detailed map, so does driving across town to pick up a gallon of milk. A map of Los Angeles is of little use in New York. A ski map of Crested Butte provides no guidance on Mt. Bachelor. Whether you rely on a printed map or satellite GPS, make sure it’s in sync with your travel plans.
Growing up in Los Angeles I relied on Thomas Brothers Maps to help me get around town. The maps, bound by a spiral spine, were necessities for driving around Los Angeles and the surrounding counties. The maps were detailed, simple to use, and extremely efficient.
When I hike in the mountains, I mostly rely on trail maps from National Geographic. Never would I consider hiking in a national forest without one. Would you?
Nowadays, satellite navigation through phones, watches, and other electronic devices have replaced the need to carry a printed map unless travelling in remote areas with poor reception.
Have you ever been lost? Driven on the wrong road? Hiked on the wrong trail? It’s a scary feeling once you realize you may be lost. Anxiety runs high until you recognize a familiar landmark.
Having the right financial map can help you navigate your investments. Like a GPS, your financial map can guide you to your desired destination. Your map is a financial plan. It will help you identify your goals and direct you to the best path to achieve them. However, most investors don’t follow a plan, or if they do it’s the wrong one.
Here are a few suggestions to help you follow the right financial map.
The right way:
Your map should be a collection of your goals – no one else’s. Committing your financial goals and dreams to paper gives you an excellent chance of making them come true. Your goals, once documented, become a gravitational pull, navigating you to your destination. In addition, after you write down your goals, you can quantify the time and cost it will take to achieve them.
Your map will help you avoid the wrong roads and trails, keeping you focused on your route. A financial plan will help you answer several questions like, “Can I afford to retire?” or “Do I need to be worried about the market volatility?” It may also help you avoid financial landmines like Bitcoin.
Your map should be checked periodically. After you have departed on your financial journey, check in often to make sure you’re still on the right path. I refer to my hiking map often to make sure I’m still on the right trail. If I have deviated from my goal, I must find the fastest, and safest, route to get back on track. Your financial plan will occasionally be knocked off track through markets rising and falling. Adjusting your plan and portfolio is necessary for you to achieve your goals.
The wrong way:
Following someone else’s map will never get you to your financial destination. Trying to keep up with your next-door neighbor is no way to plan for the future. Who cares if they have a bigger boat or a faster car? Are you jealous of their social media posts? Planning through envy is a sure way to end up in the poor house.
Listening to the media. The media’s job is to report on the news and entertain their audience. They’re not talking directly to you, nor are they giving you specific investment advice. When a reporter says the market is going to rise or fall, they’re making a generalization about its direction. They don’t know you or your situation. If you listen to the news, do so with a skeptical ear.
Leaving your financial future to hope and chance. Hoping you have enough money to retire someday is no plan. A vague promise of a bright future will insure you won’t have one.
A financial plan will require some time and effort on your part, but the results will be time well spent. Once it’s complete, you’ll be able to refer to it often and adjust it as needed. It will keep you focused on your final financial destination.
“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?” ~ Luke 14:28
November 28, 2018
Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.
Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.