What are your goals in life? Take a moment, right now, and write them down on a slip of paper.
Maybe the goals you chose to write down are career-related. Maybe they are family-related, or perhaps they involve moving to a new city or country. Everyone has different goals in life, and that’s one of the things that make life beautiful. However, all of these goals do have one thing in common: finances.
In order to achieve your life, career, family, or location-related goals, you must first set and achieve some financial goals. Luckily, you don’t have to walk that path alone. Financial Advisors are professionals who are trained to help clients hone in on their financial goals and take measured, effective steps toward those goals. Meeting your financial goals will make it possible for you to achieve in other aspects of your life.
Setting and working towards financial goals is an ongoing process that involves continual adjustments along the way. Here are some key ways in which a Financial Planner can guide you through this process.
Defining Your Financial Goals More Clearly
Most clients already have life goals they would like to achieve. For example, your goal may be to retire to a Caribbean island or to transition into a new career in the next five years. Clients often know they will need a certain level of financial success to achieve these goals, but the actual amount of money they need to save or invest isn’t clear. This is something your Financial Advisor will work with you to clarify.
As your Financial Planner talks with you about your current life and what you would like your life to be like five, 10, and 20 years from now, they will evaluate what your finances need to be like in order for you to meet those goals.
Creating a Plan
Once you and your advisor know what your finances need to look like at a defined point in the future, you can start working backward. You can create a plan to systematically, step-by-step, work towards that overall financial goal. Achieving your financial goals will allow you to meet your other life goals, whatever they may be.
Creating a step-by-step plan with your financial advisor can make your financial goals seem much more realistic. You can focus on the short-term, actionable steps you need to take every day, week, and month, rather than feeling overwhelmed by your big, overarching goal. Saving $50 a week, for example, seems far less intimidating than saving $52,000 over the next 20 years.
Evaluating Risk Tolerance
Meeting your long-term financial goals almost always involves investing your money. Investing can be a little intimidating, especially for clients who are looking to invest for the first time. With any investment, there is always some level of risk — a possibility that the value of your investment will decrease.
Financial Advisors take measures to reduce risk. For example, they will diversify your investments across a wide range of companies and industries, making it far less likely that you will lose money overall. However, each client does have a different level of risk they can tolerate. It’s important to invest within this risk tolerance in order to make sure you can meet your financial and life goals.
Early on in your professional relationship with a Financial Advisor, they will work with you to assess your level of risk. At RLJ Wealth, we do this with a comprehensive plan called Riskalyze. It assigns each client a risk tolerance score between 1 and 99, and it uses the latest statistical data to tell us how various investments will perform. Riskalyze helps ensure we give each client the best-informed investment guidance to help them meet their goals without taking on more risk than is needed.
Exploring Different Options
There is often more than one way to meet your goal. For example, if your goal is to retire in 10 years, you may need to start investing more money in order to have enough. You can meet that goal by cutting back on expenses, or you can look for ways to earn more income to invest. Neither option is necessarily better than the other. Your financial advisor can talk you through the various ways you could better work towards your goals, ultimately helping you choose the most beneficial path.
Sometimes clients will start down one path towards their goals and realize, partway through, that they chose the wrong path. That’s absolutely okay. Your Financial Advisor can help you re-group, re-evaluate your options, and find other ways to meet your goals.
Making Life Adjustments
John Lennon once said, “Life is what happens when you’re busy making other plans.” While Lennon was not a Financial Planner, this quote is absolutely applicable to the work of Wealth Managers.
Often, we work with clients to make a comprehensive financial plan. But then, life changes. Maybe the client moves into a different position at work, and that new position comes with a bump in pay. Maybe they have another child unexpectedly, or perhaps they receive a serious medical diagnosis. As Wealth Managers, it’s our job to help clients navigate these changes and re-negotiate their financial plans accordingly.
We aim to make changes that will allow you to still meet your long-term goals. For example, we may re-configure your investment recommendations. Or, we may find that pushing your target retirement back one year will allow you to still retire in your chosen location. Sometimes it is necessary to re-calibrate your goals a bit, but we do our best to help you achieve your original goals – even when life happens.
Ordering Your Goals
It’s common for clients to have more than one financial goal. For example, one of your goals might be to pay off debt. Another goal may be to contribute to your child’s college savings fund. Without a strong financial background, you may not know which of these goals to pursue first. Sometimes, you can pursue two or more goals at the same time. Other times, it is best to knock out one goal before you start pursuing another one.
As Wealth Managers, we always want to get to know our clients as people. This helps us guide you in prioritizing your goals. Of course, we will also analyze how ordering your goals in certain ways will affect your overall financial picture. For instance, we may find that paying down your debt before you start investing will lead to larger financial gains overall. Or, for another client, we may find that it’s best to start investing while you’re still paying down debts. These are tough decisions to make on your own, and there is no one-size-fits-all plan – so meeting with a Financial Advisor is very wise.
Setting financial goals is the first step. Working towards those financial goals is what will ultimately allow you to achieve them. A Financial Advisor can help you every step of the way. If you’re looking for an advisor contact RLJ Wealth Management. We take a client-focused approach, and we always prioritize your goals.