Obstacle 1

1. No Clear Goals

“You can’t hit a target you cannot see, and you cannot see a target you do not have.”

—Zig Ziglar

Imagine walking into a medical office, filling out a few papers with some background information on yourself, and then being rushed back to see the doctor. After a few pleasantries, the doctor opens a cupboard, pulls out a big bottle of pills, and starts touting all the great effects the medicine could have on you. He highly recommends you start taking it and ditch your other prescriptions, because his other patients really like these new ones better. No thorough health exam, no detailed questioning or diagnostics, no overall health planning—just a recommendation for these specific pills he already had ready to sell on the shelf.

Feels dirty, doesn’t it? Prescription without thorough diagnosis is malpractice. This scenario seems unthinkable in the medical field, yet most people experience just such a scenario when working with the 600,000+ “financial advisors” in the country. Most financial professionals sell one-size-fits-all investment pills instead of crafting a personalized financial strategy for individual clients.

Get a Road Map

Just as your individual health conditions, family genes, and needs must be at the center of any valid, valuable health plan, your personal goals, concerns, and dreams must be at the core of your family’s financial life blueprint.

Many people have investment accounts and a goal to someday retire. They want to make sure if something happens to them, their family will be taken care of. Their pain point, though, is that without having specific and clear goals, there’s really no way to track or measure progress. Without that point of reference, too many people hand over their money to financial hucksters selling magic pills—or annuities, investment portfolios, and insurance policies as the case may be—without considering their overall context before taking action.

Couples often come into an initial appointment with many different financial statements in hand. We hear questions like this often—and maybe you’ve even asked them before: “Here’s what we have. Can you help us? How can we do this better? How would you invest differently? Do you think we’re getting a decent investment return from our current financial advisor? Are we paying too much? Do you think we have enough money to retire? Are we on track? How much do you think we need before we can finally stop working?”

In these situations, we have to start by taking a step back. We need to define their goals clearly before we can do any analysis. They have to know exactly what they’re trying to accomplish before I—or anyone—can offer them relevant advice. I have found that most people haven’t thought about their goals, or at least verbalized them, before coming to see us. Sometimes couples get a deer-in-the-headlights look and ask each other, “Well, what are your goals for retirement?” The two often have different ideas about what life should look like when they stop working or what their savings should be going towards.

Maybe coming up with a written plan seems like unnecessary or irrelevant work, but consider this: According to a study of Harvard MBAs, only 3 percent had clear, written goals and a plan to accomplish them. The result? Those in the 3 percent earned, on average, ten times more than the other 97 percent combined. If you knew you could give yourself a tenfold better chance of meeting your financial targets, I’m guessing your time planning and preparing would feel worth it.

Getting Specific with Your Goals

A lot of people come to us without a clear direction or sense of purpose. Planning for your financial future often doesn’t seem fun; in fact, it feels overwhelming. You may feel uncertain regarding how to proceed or which options are available to you. It can be difficult or even counterintuitive to break your financial plans down into such specific, measurable goals. Spelling out your exact plans on paper can also feel stressful, because once you do so, you’re more accountable.

Given the massive amount of financial information and advice available, from all kinds of advisors as well as online and in the news, you may feel confused or even paralyzed. You may not know what your goals should be. You’re just trying to do the best you can with the money you’re earning at the moment.

I get it. And it’s my job to help.

To come up with a plan, we first need to get on the same page about your well-defined goals. These are specific. You need to be clear about what you want your money to do for you and for those you care about. For example, one couple we work with has a goal to take two big family trips a year, including one trip in which they pay for all the family members, spouses, and grandkids. Such a goal prompts follow-up questions. How much would such a vacation cost? If they have a family tradition of going to Hawaii, maybe that one family trip has a price tag of $30,000. We can then incorporate that clear, specific goal with an accurate cost into their planning process.

Once you have a specific, tangible target, you will feel much more motivated to change your financial habits, because you have clarity and a sense of purpose. In the case of an annual trip to Hawaii, that couple wants to maintain a family tradition so that they can strengthen family bonds and make great memories with their grandkids. The cost of that personally meaningful goal is approximately $30,000 per year. Having a number to work toward to achieve it will help them exercise more discipline with their saving and spending. Working together toward that goal is a wholly different experience from simply handing an advisor some statements and asking, “Can we do better with different investments?”

Clients commonly start out with very vague, unmotivating goals. They want us to help them get a better return on their investments or earn a better interest rate. Whether we can achieve that result for them is actually irrelevant, because it’s a bad idea to try to increase returns without a purpose. It’s a slippery slope to have no context or goals for an investment portfolio. If you don’t know how much money you need or how you want to use it, then you’ll always be trying to make more, which can lead to taking on unnecessary risks.

If you simply assign your financial advisor to try and make you lots of money, you’re essentially letting someone gamble with your nest egg. You will be more successful if you write down specific, meaningful goals, figure out how much they cost, the timeline of when you may need access to your money, and then work together to design the best strategy to fund your goals. We typically aim to help families create a list of at least five to seven financial priorities and understand the why for each of them. Then, we work backward to see how we can achieve them while taking on as little financial risk as possible.

The example of a particular family vacation is extremely clear and actionable. Some people start with a more vague notion, such as wanting to retire in ten years, but at least such a timeline offers more specificity than simply getting better returns. When people tell me they want to retire, we ask them when they’d like to switch from being dependent on a paycheck to paying bills via their investment income. They often don’t know and ask us what a good age would be, but the answer really depends on how much they’ll be spending. I’ve found it’s better to decide at what income level you’d like to stop working rather than at what age you’d like to stop working. It comes down to this: to achieve success, you need to work in this order—know what you want to do, figure out how much it costs, and then plan to generate that income.

The Goals Conversation®

Given how rarely people know exactly what they want from their finances—and given how important it is for us to be on the same page—the first meeting with the team at my firm is called the Goals Conversation. That conversation involves getting crystal clear on the outcomes you want, before discussing any specific actions to take with your money. Goals can involve all sorts of outcomes, not just retirement. The process requires finishing the sentence, “We want to pay for…so that…”

The Goals Conversation is specific to my company, but that doesn’t mean its premise should be. In fact, its premise is relatively simple, and it shows a level of depth and care you should expect if you want to get the most out of your experience with your advisor (or preferably) fiduciary. To do your part, given the complexity of the issue, there are questions you should ask yourself—and that your financial professional can help you work through—when having these big picture goal conversations: What is important and unimportant to you? What keeps you up at night? What does money mean to you? What, if anything, do you want to pass...