Use your financial strategy as your GPS | Lagniappe

When you’re driving these days, it’s pretty hard to get lost because your smartphone’s Global Positioning System (GPS) can take you just about anywhere.

And as an investor, you can have a similar experience employing another directional tool – a personalized financial strategy.

Let’s look at the parallels between a GPS and this type of strategy.

For starters, GPS pinpoints your exact location at the start of a journey – in other words, it tells you where you are. And when creating a financial strategy, your first step is to assess your current situation by answering these types of questions:

What are your strengths? How much do you earn? How much do you owe? How much do you contribute to your IRA, 401(k) or other retirement accounts?

Once you have a clear picture of your finances, you’ll be ready to begin your journey towards your long-term goals.

Once the GPS has identified the starting point, it will tell you where you want to go and directions to help you get there. And it’s the same with your financial strategy – you want it to take you to a particular place in your life.

In fact, a well-designed strategy can show you the steps needed to help you reach more than one destination – a place where you can send your kids to college, a place where you can comfortably retire, a place where you can leave the type of inheritance you want, and so on.

Here’s another element of GPS that applies to financial strategy: warnings. You probably know those thick red lines that GPS displays to indicate upcoming traffic delays.

And while they’re annoying, they’re also useful for warning you that you might arrive at your destination later than expected.

Your financial strategy may express “warnings” about events that could prevent you from achieving your goals.

These barriers can include an illness or disability that could prevent you from working for a while, or the need for certain types of long-term care, such as a stay in a nursing home or the services of a home helper.

Your finance strategy can not only identify these threats, but with guidance from a finance professional, suggest potential solutions.

As well as providing warnings about things like heavy traffic and road construction, GPS can alter your route if you miss a turn or decide, for some reason, to take a slightly different route.

Your financial strategy can also show you alternatives, if complete and overseen by a finance professional, who, using specialized software, can create hypotheses – illustrations that provide alternative outcomes for different stages. , such as retiring at different ages, investing different amounts each year, or earning different rates of return.

These assumptions can be very helpful as you chart your path to your goals, especially if you need to change your plans along the way.

Your GPS and your financial strategy are two great tools to help you get where you want to go.


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Don F. Davis