Define your goals

When planning for a financial goal or objective, it is important to develop a goal that is attainable and measurable so that it has a better chance of becoming a reality.  For example, to say “I want to retire when I am 65” is certainly stating a goal and may be attainable, but it isn’t very measurable.  Now lets restate the goal with some level of measurement.   “I want to retire when I am 65 with an equivalent income in todays dollars of $3,000 per month and I am 40 years old today”.  Now you have a more measurable goal because you know how long you have to accomplish this goal and how much is necessary in financial terms.  We certainly would not suggest to stop there however.  You should add more levels of measurement like, how long you believe you will need this income, what do you have to commit to it now, and how much can you commit regularly and on a continuing basis.  The importance of this exercise can not be understated.  The more measurements you add for your goals the more you own it and the more likely it will become a reality.  One of the most important functions as financial advisors we have is to help our clients define their goals.  Not only for their benefit of having a specific destination, but for us to have as clear a picture as possible so that we can help develop a workable and manageable plan of action for our clients.

Understand your risk

It is certainly not uncommon for us to discover that prospective clients have not taken the time to define their goals concisely and consequently find that once they have, there are investments or strategies they are using that are not appropriate.  We use the term “invest appropriately” to educate clients on the need to make sure that the investments or strategies they are employing are working toward their goals.  All investments have inherent risks and it is important to understand what those risks are and whether they are worth it.  Typically the longer you have to accomplish your financial goals the more risk you should be able to bear.  We do realize that certain clients are just naturally risk adverse when it comes to investing.  They may only consider “safe” investments for fear that they can not bear losing their original investment.  However, just because an investment is termed safe doesn’t mean there is no risk.  Should that investment not generate enough return to accomplish the needs of the investor, they bear the risk of losing purchasing power and potentially running out of money and jeopardizing their goals.  That is why it is vital in today’s environment to invest appropriately.  We can help clients ease into investments that they may naturally avoid by educating them on the various risks that are unique to each type of investment, or strategy and how they can be employed to assist them in reaching their goals.  The concept of risk and the various risk terms that are used in the investment arena are vast and would take up too much space on this site for us to elaborate on.  Suffice it to say that is why working with a knowledgeable, competent advisor and developing a financial plan is certainly important if not vital.