Charting Your Course

During this past Christmas, we had a houseful of guests, most of whom traveled a long way to get to East Tennessee. One family member in particular had planned to make the drive from New England with her significant other, but ended up having to come on her own. When she arrived, she commented that this was quite possibly the furthest she had driven alone but that her trip was uneventful largely because she had a GPS to guide her and had preplanned her stops along the way. She likely wouldn’t have had the confidence to make the trip at all had she not planned ahead and secured additional guidance.

I think most of us would agree that advance preparation is a good idea for any journey. Yet, this mindset often doesn’t get applied to our financial lives. Mapping a route to retirement doesn’t occur to many people until they decide it’s time to stop working.

In reality, managing your money for a lifetime is less like driving across the country and more like trying to sail around the world. It involves setting a destination, charting a course, and then making adjustments along the way as challenges arise. The tricky part is getting back on tack once the seas settle.

Here are a few things you can do to ensure that you arrive on your terms:

Focus on your destination. It’s easy to lose sight of where you're headed when you’re in the middle of a storm, but it’s important to remember this trial will pass. Life can throw you curveballs. That’s why it’s important to review your financial goals annually and make adjustments within the context of your long-term plan.

Storm’s a’ coming. Batten down the hatches. Don’t let fear guide your investment decision-making. Hasty, emotionally-charged decisions often turn out to be regrettable. During 2008-2009, many investors reduced their stock exposure AFTER prices had fallen when it actually was a good time to be buying stocks. Prepare for the next threatening market storm by investing your time and energy into having a financial plan before the storms arrive.

Assess damage and reevaluate your course. Once a storm has passed, it’s time to see how far off you are to your destination and adjust your course accordingly. For instance, if you still want to retire at the same age, that may require that you lower your retirement income needs. Or, you may have to work longer to have the same living standard in retirement. Then it’s just back to the basics: save more, spend less.

The peace of mind that comes from knowing your destination and the comfort of having a solid plan in place to get there can make the adventure of your journey even more enjoyable.