I believe the biggest mistake people make in financial planning is starting by asking ‘what’? What investments should I own? What country should I invest in? What account should I contribute to; an RRSP or a TFSA? These are often the first questions people ask me when they find out I am a financial advisor. Can you imagine going to the doctor and asking for a prescription before talking about what your symptoms are? Or what other medications you’re already taking? But the investment industry does it all the time. Instead of starting with ‘what’, we first look at ‘why’. Knowing your ‘why’ gives you a filter to help guide you in making the decisions that are truly aligned with your goals and what’s most important to you.
German philosopher Frederick Nietzsche once said, “He who has a strong enough why, can endure any, how.” Knowing your why is an important first step in figuring out how to achieve your financial goals and what you need to do to get there.
We’ve been conditioned to think about our retirement planning as it relates to numbers. There are countless retirement calculators and varying stats like, ‘you’ll need 75% of your current income to live comfortably,’ but none of these scenarios take into consideration your unique circumstances. The simple truth: There isn’t one magic number for everyone.
When working with our clients, the first thing we do is to take them through an in-depth discovery to help them clarify what really matters to them – both now and in the future. It’s the initial step in creating a successful wealth management strategy. And even though everyone’s why is unique there are typically three areas people focus in on: Family, occupation and recreation.
For example: Do you want to leave a legacy for your children? Start a new business? Retire early and travel? Buy a vacation property?
Only after you take the time to clarify and prioritize your why will you be able to create the right plan to help you to fulfill your life goals.