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Financial Planning

4 Keys to Reaching Your Lifetime Financial Goals

Understanding the state of the market, as well as your wealth, objectives and career trajectory, can help you create a solid plan to maximize returns.

Developing a comprehensive retirement plan isn't easy. You need to have a strategy.

For decades, the business world has been guided by something called SWOT analysis to evaluate new ventures, ideas and opportunities. SWOT, you say? By identifying Strengths, Weaknesses, Opportunities and Threats, executives have made decisions that helped to shape directions of entire companies.

You can apply a similar model to manage your own finances. The categories of the traditional SWOT analysis don't match up with the specific goals of financial planning. But let's re-imagine the SWOT analysis to create a better financial focus for investors.

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Using this revised SWOT analysis, you can work with your advisers to develop a comprehensive picture of your past, present and future finances. Let's take a look:

State of the Market

One of the keys to investing money to maximize future returns is knowing the environment you're getting into. This is a three-tense discussion involving past, present and future. Previous trends often predict where the market is headed. Understanding where we are in the current market cycle can offer a better indication of how long conditions will remain status quo.

This information isn't easily interpreted, even with advances in modern technology. That makes it even more important to discuss the ebbs and flows of the markets with your adviser so you can understand where you have opportunity and whether your current investments will work in the future.

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For example, with the current interest rate environment, investors may ask their advisers about how bonds are being affected. If bonds are never going to be what they once were, what's going to take their place? The average investor might be unclear, but a financial adviser should be able to help provide some clarity—and guide them through any bear or bull market in the process.

Wealth

Also a foundational issue, the makeup and value of your assets play a vital role in determining where to put those assets. Mapping an investor's wealth is essentially a status report on the investor and is one of the biggest indicators of how much risk an investor can, and is willing to, tolerate. Higher net-worth individuals can afford to take a few more chances with where they invest and what they invest in. Investors with less wealth may still be willing to take risk but need to understand how much they are risking in relation to their overall financial picture. You and your advisers need to have an answer to "where are you now?" in order to even ask "where do you want to be?"

Objectives

To develop a retirement plan that gets you from today to years down the road, you need to provide yourself and your adviser with some targets to hit. These targets need to be more than just a number. Ask your advisers to address life goals as opposed to investment goals.

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Unfortunately, most people have never had conversations about their personal objectives with a financial adviser. Do you want to own a boat by your 50th birthday? What about college tuition for your kids? When do you want to retire? Some of these objectives are costs, and some are states of being, but all of them need to be cornerstones of your investment plan and analysis.

Trajectory

A critical component of your financial future is your career path. To make the best decision with your finances, you need to understand the patterns that your professional future can take, based on what work you choose. For example, while they may end up with similar incomes, a lawyer branching out to start his own practice will have a very different trajectory than a corporate executive that plans to stay in his or her current position for a long time. A career path isn't a straight line; it's often curved and bumpy, but mapping out career paths early in the process can help smooth out the imperfections that can become barriers to retirement.

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It may be difficult for you to see your own professional trajectory—in terms of compensation, equity opportunities, benefits, stock options, etc.—five, 10, 20 and 30 years down the road. However, in many cases, advisers have the advantage of working with multiple clients in similar or identical professions, giving them a more comprehensive view of your potential and most likely professional outcomes.

By discussing the State of the Market, as well as your Wealth, Objectives and Trajectory with your adviser, you can ensure you're both on the same page and have a clear shot at the final target. This shouldn't be a one-time analysis. The new SWOT needs to be checked and re-checked, evaluated and critiqued, and constantly tracked against performance to make sure you and your advisers are addressing changes in your personal situation and circumstances. Only then can you bring the full financial picture into clear focus and make sure your financial story leads to a satisfying conclusion.

Phil Simonides, CFP®, is Group Vice President at McAdam, where he oversees the firm's Washington, D.C., metro, New York City metro and Boston offices.

About the Author

Phil Simonides, CFP®

Senior Vice President, McAdam Financial

Phil Simonides, CFP®, is Senior Vice President at www.mcadamfa.com, where he oversees the firm's Washington, D.C. metro, Chicago, Boston and central New Jersey offices. As a member of the executive team, Simonides serves as the Chair of Advanced Planning at the firm, specializing in strategies for high net worth individuals and families, and business owners. He joined McAdam in 2011 after having spent the majority of his 29-year career at Ameriprise Financial.
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