Jumbles of Numbers

Without setting your life goals, saving and investing can seem like a bunch of disconnected facts and figures

For many investors, the process of monitoring progress to retirement can seem to swirl around a bunch of numbers: portfolio performance, market index returns and portfolio rebalancing percentages, to name a few.

These are important figures to keep in mind, but they miss a key critical element: how you go about defining and prioritizing your unique life goals, and then tracking your progress toward them. Here are five ways to make sure   that the numbers don’t sidetrack you from what’s really important — living the personally enriching life you have imagined for yourself.

Start with the big picture. The way you view your long-term financial picture generally can be segmented into three goal “buckets:” your needs (think housing, health care), wants (hobbies, travel) and wishes (fishing boat, new outdoor kitchen).

Be specific. What goals are most important to you? To pay down debt? To provide college educations for your children and grandchildren? To take up a new passion? Once you’ve identified your goals, put a specific price tag on them. Just   as with The Price is Right TV game show, the closer you get to the actual retail price of your goals, the better. Then, rank them in order of importance. For example, is taking a trip once a year more important than entertaining friends and family every weekend?

Match “must haves” and “nice to haves” to your income. Basic needs take priority: you need housing, food and health care. If your investments, Social Security and other sources of income can cover your basic needs, you can begin to focus on wants and wishes. One of the values that a financial advisor   can bring you is to facilitate goals-based planning discussions, and providing tools to help you visualize how your investments and savings can help you achieve those objectives.

Be flexible. Unless you have perfect self-awareness, you probably won’t be able to afford all your wants and wishes. It’s relatively easy to scale back some of them to achieve greater balance among your goals, assets and future income.

Own your future. Money is simply a tool that, used correctly, will give you the freedom to pursue your goals. The value and satisfaction you derive from your wealth is more a function of how you see yourself living a meaningful life, and having the flexibility to adjust as your life changes.

When planning for the future, it sometimes can be tempting   to focus on performance returns and growth in account balances. But numbers can just as easily distract you from the life purpose that your savings and investing enable. By paying greater attention to how you are progressing to your goals, rather than simply the yardstick used to measure them, you reaffirm the eternal wisdom that life comes first, money second.


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