The Diversified Blog

A wealth management blog dedicated to creating a long lasting sustainable retirement.

When Planning, Focus More on Goals Less on Numbers

Financial planning is a complex, lifelong process that people tend to approach with a numbers orientation. What rate of return do I need to reach my goal? How much insurance do I need? Can I afford a bigger house? How much money do I need to save for retirement?

To support their pursuit of the "right numbers," people often use separate advisors -- for instance, a banker, a financial planner, an insurance agent, a tax professional, and an estate planning attorney -- to oversee the various components of their household wealth. But can too many cooks spoil the broth?

This "siloed" approach to financial planning can easily lead to redundant investment strategies that could create exposure to unnecessary levels of risk. It may also result in multiple, random investment accounts in need of consolidation. Furthermore, such an approach may inadvertently overlook crucial tools, leaving entire planning areas to chance.

Unlocking Financial Synergies

When viewing their financial goals -- such as buying a home, paying for a child's education, or saving for retirement -- individuals typically think in terms of what those goals cost rather than how achieving them might affect their lives. If, however, they were to re-engineer the planning process and assess their current life issues and future aspirations prior to selecting investments and asset allocation strategies, they may be in a better position to achieve satisfactory outcomes. Perhaps equally important, by putting life circumstances at the center of financial decision-making, individuals may find more meaning in their actions with regard to money.

Indeed, values have a significant role to play in determining how individuals manage their assets. This is one way in which a holistic approach to "financial life planning" enables individuals to better assess their wants and needs, establish meaningful priorities, and avoid misguided investments. And, as life circumstances and priorities change -- as they inevitably will -- so too do financial goals. In this way, individuals employing a holistic approach to planning can easily identify and address those areas of their financial lives that are still working well and those that may be hindering their financial well-being.

Crafting a Plan

Crafting a plan that reflects your unique situation and that ties your life aspirations to your financial goals is part art, part science. To achieve this level of planning you need to rely on the guidance of a single skilled advisor -- someone who will take the time to get to know you and your circumstances and who will put together an appropriate combination of vehicles, strategies and, where appropriate, additional planning professionals to help achieve your goals -- whatever they may be.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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I'm a Single Parent. How Can I Get Ahead Financially?

As a single parent, you need to understand the financial strategies that can stretch your income and help you lay the groundwork for a secure future. Consider the following lessons to help improve your family's bottom line:

 

Identify Your Goals

 

You can't have a financial plan without first defining your financial goals. Start by recording all of your short-, medium-, and long-term financial goals.

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© 2015 Diversified Asset Management, Inc.

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Investor Know Thyself

In an ideal world, emotions would play a very small role in the way people invest and manage their money. Everyone would thoroughly research their options, maintain realistic expectations, and keep counterproductive habits under control.

 

But in the real world, even well-informed investors sometimes make emotionally charged decisions that may threaten their ability to stay focused on important financial goals, such as accumulating enough money for retirement. In fact, such missteps are so common that many academics have done extensive research on "investor psychology" or "behavioral finance" to explain why some people tend to keep encountering the same obstacles in their financial lives.

 

As you might imagine, different financial attitudes can result in very different consequences. For example, the behavior known as "anchoring" is the tendency for investors to hold on to a belief based on their own limited experience, despite the availability of contradictory information.

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Is Your Portfolio "In Style" or Making a Bad Fashion Statement?

It is fairly common knowledge that a retirement portfolio's carefully constructed asset allocation can become unbalanced in two cases: When you alter your investment strategy and when market performance causes the value of some funds in your portfolio to rise or fall more dramatically than others. But did you know there is also a third scenario? Your portfolio can become unbalanced due to unexpected changes in the funds' holdings.

 

The phenomenon known as "style drift" generally occurs when a fund's manager or management team strays beyond the parameters of the fund's stated objective in pursuit of better returns. For example, this may occur when a growth fund begins investing significantly in value stocks or when a large-company fund begins investing in the stocks of small and mid-sized companies. As a result, the fund's name may not accurately reflect its strategy.

 

If style drift occurs within the funds held in your portfolio, it could alter your overall risk and return potential, which may influence your ability to effectively pursue your financial goals.

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