Your Financial Goals Are More Important than Your Money

by Neal Frankle, CFP ®

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You are probably reading this blog because you want to see some tangible improvements in your financial situation.  I’m with you Pilgrim.  But if you really want to do that you should forget about your money for the time being and get clear on your goals. Crystal clear.

Here’s a letter from a young man who was on the right path for a while but hit a fork in the road and doesn’t really know which direction to take:

“I have been working the last few months and saving nearly everything. I currently have about 12k in accumulated liquid assets spread throughout various checking, savings, and a money market. I have nothing that I am really using as a write off currently, and am on track to continue to add about $900 per month to the savings. I know that there has to be better ways to save than a straight savings account at 2%, and I know that for tax purposes I should probably start spending on something to use as a write off. What should I do now?

I use quicken, and have EVERYTHING documented, as well as keep receipts for ALL purchase in a binder by date. I don’t know if this helps any for the purposes of investing, or for write offs, since everything is paid for through personal accounts, but, i have it, and I’m the practice of keeping my records, so if it is something that i can do to help for the future I already have the habit formed.


I would love to figure out the best plan of action
.”

What advice would you give this young person?

While you’re thinking about it…let me chime in with a few ideas of my own.

First, celebrate the good news.

Let’s face it…this kid is a dream come true for any father of three daughters looking for a good match…

1. He’s got a job.

2. He saves money.

3. He has assets and no debt.

4. He tracks his spending and he doesn’t have a problem with overspending.

5. He is thinking about his finances and is wondering what is best course of action to take is.

6. He is asking for help.

In my opinion, this is the most important and impressive thing about this young man. What’s not to love about this guy? He’s doing great.

What needs to be addressed?

Based on this e-mail, can you give this man some suggestions? Should he buy real estate? Should he invest in mutual funds? Should he pursue an advanced degree? Open his own business? Can you help him decide? I can’t.

I can’t because I have no idea what he wants to achieve.

What are his goals? What does he dream about doing? What’s important to him? Do you know? I don’t.

And if we don’t know that, we can’t really help him. The best thing we can do now is to simply ask him more questions. We have to understand his ultimate goals in order to offer up strategic suggestions…cabishe?

It sounds to me like this person is very focused on financial security. That makes him really stand out among his peers, which is great. That kind of character will pay off in spades as he gets older. But if this young man was my son (or better yet, son-in-law) I’d suggest that he take the time to think a bit about what he wants to get out of life.

I could be wrong, but I just get the sense that he’s navigating his life around his finances rather than structuring his finances to help him navigate the life he wants to lead. I know this sounds really weird coming from a financial adviser, but my experience tells me that without absolute clarity on goals and values, it’s impossible to make headway towards financial success.

Why should you care about this?

If you are a 20-something or if you know such a person, this story is important.

1. It proves that you can earn a modest income and still achieve financial success.

2. It illustrates the critical role values and goals have on financial freedom.  Our writer has the money but not the clarity.  As a result, the freedom evades him.

I’m reminded of that movie The Graduate. I was 12 when I saw it for the first time and fell in love with it – probably because I had a major crush on Anne Bancroft, but let’s not go there.

Remember the opening scene when Benjamin comes home from college? A friend of the family tries to convince Ben to pursue a career in plastics – despite the fact that Benjamin demonstrates no interest whatsoever. Benjamin basically drops out of life because he can’t figure out what he really wants – but that doesn’t stop everyone else from telling him what he should do.

I wonder if our writer has taken the time to think about what he really wants. Again, it might be a great time to invest in real estate or mutual funds right now…if that supports his ultimate goals.

Am I reading more than I should into this e-mail? What advice would you give him?


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