Every day, thousands of Americans make the decision to talk to a professional about their finances and start planning for the future.
You might be on the home stretch to retirement or just starting your career. Perhaps you are getting ready for a second career or thinking about opening your own business. You might already be in retirement and need to make sure you won’t outlive your assets. In any of these situations, you may have important decisions to make, and questions and concerns about your financial future.
A benefit of working with a financial planner is having someone help you balance competing financial priorities.
The process of organizing your finances can seem overwhelming. One simple and effective system is the one used by President Eisenhower. His way of thinking about priorities served Eisenhower well as a general and later as the leader of our country.
“I have two kinds of problems, the urgent and the important. The urgent are not important, and the important are never urgent,” Eisenhower once said.
In the context of a financial plan, important activities help you achieve your long-term goals. Urgent activities keep your life on track in the here and now.
A good financial planner will help you distinguish between important financial priorities and urgent ones. More importantly, a financial planner should help you find the right compromise between meeting your needs today and saving for the future.
Sometimes it can be hard to distinguish between urgent problems and important problems. The most common mistakes investors make are the result of this confusion.
We all know that accumulating and protecting a retirement nest egg is very important to our financial health. Someone who is behind schedule in their retirement savings may feel like this important problem has become an urgent one. Feeling an urgent need to make up for a shortfall causes investors to make mistakes like taking on too much risk. Similarly, when the market goes down, some investors feel an urgent need to sell their stocks to “protect their nest egg.” History and academic research have proved that kind of behavior to be a mistake.
Experience with the technical aspects of finance alone doesn’t make a great financial planner. A competent financial planner should have expertise in areas like taxes, investments, retirement plans and estate planning.
The best financial planners will give you tools to make good decisions in the present and for your financial future. Sometimes the greatest value of a financial planner is how they help you help yourself.
Matthew Treskovich is the chief investment officer for CPS Investment Advisors.