Putting the cart before the horse
People make a conceptual error they wouldn’t make in non-financial arenas. Imagine, for example, that you are taking a cross country trip by car. With which of the following choices would you be most concerned in order to judge the trip a success?
A. Averaging 30 miles per gallon
B. Driving 85 miles per hour on the highway
C. Arriving safely at all planned destinations on time.
Did you choose C? Few people would judge the trip solely in terms of either the operating costs or the exhilarating performance of the car. Yet people do exactly that with their finances when they regard their journey primarily as one of investment management rather than financial planning. They focus mainly on the costs of investing (low fund expenses, advisory fees, etc.) or they care most about performance (beating the market, beating their brother-in-law). An investing lifetime that succeeds on all those counts can still fail to get them where they want to go. Absent a detailed itinerary – a financial plan – there is no meaningful benchmark for judging progress.
--John F. Harrison, Aspire Financial Advisors, Inc., 275 Grove Street, Suite 2-400, Newton, Mass., 02466, 617-663-5764