President Harry S. Truman once said; “Recession is when a neighbor loses his job. Depression is when you lose yours.” While you may not have lost your job, more than likely, there’s a good chance you have lost a lot of money in your portfolio and are probably wondering what to do. It doesn’t matter if you are a business, individual, or charity, it seems as if all groups have lost faith in the buy and hold philosophy, and many are beginning to wonder if their advisers are actually doing anything to help them. Before you fire your adviser, put everything into cash under your mattress, and hunker down for nuclear Armageddon, there are a few things you should understand about how investments ideally should work within your plan, the role of advisers on your team, and important questions you should be asking whether you invest on your own, or you have someone helping you.
Revisit Your Goals
What’s important to you? If you found out you only had 6 months to live, what would you want to do in your life? Try writing your own eulogy. How would you want to be remembered? What would you want people to say about you? By starting with the important questions of life, you can get a really clear gut check and determine if you are actually doing what you want to do in your life. What are the things that came up? Often, we have limiting assumptions about what is possible in life. We use phrases like; “Some time, some day, if only blah, blah, blah”. When you take the time to have these conversations with yourself (or an adviser), frequently our real values get uncovered and we identify things we’ve always wanted to do. For example, many people say, “I’d want to spend more time with family”, or “I’d want to travel”. Once you have a list of these things, then then think about the reasons or excuses you’ve been making on why now isn’t the time. Usually this sounds like “I don’t have the money”, or “I’m to busy”.
Prioritize Your Goals
OK, so if not now, when? How much is enough? When will be the day? Perhaps you’ve achieved success in your business but you simply just don’t want to be bored with a “traditional retirement”. The important thing to consider here is WHEN. While some goals might seem crazy, no worries, just write them down. Ideally, when would you want to spend more time with family? What would you do? Where would you travel? Start to create some ideal time frames for the things that you said were important to you. Don’t worry about whether you think they are realistic at this point, just recognize that spending more time with your family WOULD make you happy, and write it down. Keep doing this exercise until you have at least 10 items on your list. Once you have the items listed, then prioritize them in order of importance. I like using index cards to do this since it allows you to move things around as you think of new things. Now ask yourself which of your goals you would be willing to give up in exchange for achieving the most important ones. Once you have completed this exercise, you have the foundation of a very powerful life plan for yourself. Now the question becomes how to pay for it.
Buy Your Happiness
OK, so how the heck do you do that right? “But I always thought…,blah, blah, blah”…Stop. Yes, money CAN buy happiness. I know,… I had you at hello, right? Here’s the thing about that…Having money will NOT make you happy, however figuring out what makes you happy, (as we discovered above in the “eulogy” exercise) formed the basis of your new plan. Now that you know what DOES make you happy, (spending more time with family, giving back to society, etc., now the question becomes, how do I use my wealth to buy those things for myself? Before you go postal on me, ask yourself, how much would it cost to leave your job so you can spend more time with family? What’s preventing it now? Perhaps you answered that making a difference in the world would make you happy? Well how much does it cost to make a difference? How much time do you want to spend making a difference? What’s preventing you from doing that now? OK, so your job is preventing that, how much do I need to have in order to “retire” so I can do the things that are important to me. Are you following all this? The point of this is to start to think about what it will cost, both personally, and financially to achieve your most important goals.
Position Your Finances
More than likely, taking less risk with your investments was one of your goals, (aka “Sleeping at night). During our exercise with the index cards, I asked you to prioritize how important your goals were to you. Where did investment risk fall in that conversation? The question really is, “What are you willing to do to reduce the risk in your portfolio?”. I think an even bigger question is, “How much risk do you really need to take in order to achieve your objectives?”. In my experience, investors are quite familiar with the question, “What’s your risk tolerance”, but most people have no idea how to answer that objectively. I have good news for you. Now that you know exactly what makes you happy, what your priorities are, and what you are willing to give up in order to achieve them, you’ve just answered what I believe is the most important question in planning; “How much, by when”.
Get Help when Needed
The fact is, we as investors usually don’t take the time to do these exercises, but now more than ever is the time to start. You have to know where you are, and what corrections you can make to get you back on track to achieving what’s important. If you don’t know how to do that, find a good adviser who can. If you have an adviser, talk to them about what you discovered about your goals and see how they can help you achieve them. If you don’t feel comfortable discussing this with your adviser, perhaps it’s time to find another.
THE LIFE & WEALTH BALANCE 
