by Anthony J. Ogorek Ed.D., CFP™
There are any numbers of people who are pitching ways to get rich. They know that there is no magic to saving regularly and then investing intelligently. So actually leveling with you will not be effective. They need to provide you with a shortcut. Now that has appeal to people.
Shortcuts have been used for years to not only sell us dubious propositions, but to make the purveyors wealthy. For instance, you may recall sure fire weight loss schemes that require just taking a pill; or wearing a garment that will melt the pounds off of you, or offer you a return that you know is too good to be true.
In a sense you can’t blame us for falling for shortcuts since we all have limited time, and want superlative results. In our experience financial shortcuts may not just disappoint you, but can cause permanent damage to your financial health.
Creating and maintaining a financial plan can be a real effort. The payoff is that you have reasonable assurances that you will not outlive your money, and are managing the full array of risks that can tank your lifestyle. People without a plan often substitute a number for a plan. In other words they boil their future financial security down to a number or two. They may say that they need $1 million in assets and a 5% annual return to hit their retirement objectives. That is their plan.
This motivation is so powerful that even some people who already have successful financial plans persist in ignoring their plan and pushing for their number. The danger with this approach is that you may be forcing yourself to accept more risk than necessary to meet your objectives.
You may also deprive yourself of one of the most important things in life, peace of mind. Constantly worrying about the future is nobody’s idea of a good time. It is also no fun when you realize that your number forced you to live much more frugally than necessary. I am all for simplification, but mapping out the next 20 or 30 years requires more than a number and a hoped for return on your portfolio.