5 Financial Behaviors that Move the Needle

Owning Your Outcome

After over 20 years of working with individuals in all kinds of economic and market environments, one thing continues to ring true with us. Dreams only work if you do. In other words, your decisions and behaviors have a larger impact on your financial success than which mutual fund, stock, or whatever investment you use.

Once you realize that most of your success is controllable, you'll be on a much faster track to "moving the needle" with your own financial goals. The solutions aren't always easy, but they are usually pretty simple.

The following few factors can really help you make a difference with your financial plans and investing goals.

Know the Goal (and the odds)

Like anything worthwhile, you need to know your goal. How much will you need? How much income? How big of a lump sum? When?

You also need to know the probability of success at meeting each of your goals. A detailed Monte Carlo analysis can help you estimate the odds of success while taking market uncertainty into account.

Fund your Plan

Once you know your goal, you probably need to fund that goal. Maybe contribute to your retirement plan at work? Maybe add to the 529 plan for the kids. Unless you are already independently wealthy, odds are that you'll need to add to your accounts in order to meet your goals.

Can't afford to save for your goals? Then, respectfully, you may be living beyond your means. Cut your spending habits, pay off that debt, and develop a plan for funding your dreams. Simple, but not always easy. If it's important to you, you'll follow through and/or find the right coaches to help.

Control Tax Costs

Taxes are the largest single cost to investors. Failure or success here can often make a huge difference. A few major decisions related to taxes:

How much can/should be in taxable, tax-deferred, or tax-free accounts?
Which investments should be in your IRA? Which are better for your taxable accounts?
Should that life insurance policy convert to an annuity?
When does it make sense to do a conversion to Roth IRA?

Limit Risks

A financial plan will only work if you (a) Get a good enough return (growth, dividends, interest) to reach your goal and (b) The risk of the investments never scares you into making a horrible financial decision.

It is critical that you know your risk budget for each account and keep the investments in line with that risk budget. This can avoid disastrous decisions like buying high or selling low.

Another way to limit risks is to have a good estate plan in place. The proper documents can save a lot of money, time, and headaches.

Have a Plan "B" for Disasters

Even the best-laid plans can encounter disaster. Here are some potential "disasters" that you may want to minimize:

You and/or your spouse become disabled and unable to work for an extended time.
Premature death.
Bear markets (drops greater than 20%) - especially at the beginning of a retirement
Weather damages your home.
Civil lawsuits

Summary

Focus on controllable decisions and behaviors first. If you get these right, your plan will be awfully solid. Once you are mastering these five areas, you can focus on the minor decisions like "Which large foreign stock fund should I own?" and "How many travel points do I get from that credit card?"

If you need a deeper dive into these topics, our team will be happy to help you see where you can "move the needle." We can be reached HERE. For some free, personalized reports on some of these topics, please visit our financial planning page and use the fact finders HERE.