Do you let your investments limit your goals, or make your goals dictate your investment strategy?

10 Apr 2013

By Darren Higgs

In my role as a Private Client Adviser I see and hear a lot of misunderstandings about the financial planning process. This ranges from the BBQ conversation about the "killing" somebody made on an investment, to the media suggesting their readers go in a certain direction, even though they are writing for the broad masses.

When the average person hears from these 'experts', it can create some uncertainty on what they should do with their finances. It is creating an illusion that there is a 'one size fits all' approach that is perfect for everybody. This approach has one major flaw, which is a severe lack of attention on the individual, i.e.that is: YOU!

In my 3 part goal setting blog series I will discuss what you need to ask yourself when setting goals and the financial considerations and strategies to achieve them.

So going back to the 'one size fits all' approach, it would be fine if we were all robots who could be programmed in a certain way and then set loose like the Energizer Bunny (and no, I am not recommending that you buy shares in Eveready!). But we are not all robots. We are people who have our own and our family's ambitions to achieve. We also have our own emotions which means we react differently to certain situations.

So, if the 'one size fits all' approach is not the way to go, what approach should you be using? I believe a far more interesting and effective approach is to utilise a 'goals based' approach.

As this title suggests, you will need to actually know what your goals are, which can be the most difficult part. Most people find it hard to set a goal and achieve it (did somebody say New Year resolutions?). Most people also set their goals with what they think others want to hear, rather than what really excites them. You only get one life, so shouldn't you live it the way you want to rather than what other people want? I know I would.

Some questions which may help you define what you actually want can be as follows:

  • What are the interests and hobbies that you would like to pursue? Think of everything that appeals to you and just list it down.
  • Are you enjoying your lifestyle? If not, why not? How can we change that?
  • If you are enjoying your lifestyle, how do you protect this?
  • How do you want your family looked after, both now and into the future?
  • What is your level of financial independence? What is the number or better still, the feeling?
  • Do you want to make a difference by leaving a legacy?
  • When do you want these goals achieved by? Most people start taking action when they can see the finish line ahead.

Everybody will answer the above in different ways however most people fail to take into account their goals when looking at their finances. This is where a good financial adviser will work with you to build a decision-making framework that recognises your financial and non-financial aspirations. This gives you a clear purpose to start with.

In my next blog I'll go through the steps of building this decision-making framework.

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