Lots of times we set savings/investment/financial objectives based on directives and formulas we read in the media. For example: “You will need 70% of your pre-retirement income once you hit retirement.” The implication of this message is that individuals can't possibly be ready for retirement if they haven't saved enough money, and the resultant effect is that too many throw up their hands in anxiety and say I'm never going to get there any way so I'll put that aside for now. Procrastination sets in. Or the temptation to invest in a manner prescribed by traditional advisors leaves investors at greater risk than is appropriate or comfortable, as all too many have recently learned. Setting objectives is particularly difficult when there are competing goals like saving for retirement at the same time it is necessary to save or pay for college or care for aging parents. Very often I am asked which should come first. Without knowing all the ins and outs of the tax law, financial aid protocol, how assets are evaluated, it would be entirely impossible to know how to allocate your savings dollars. I always suggest that rather than listen to the formulas prescribed by financial services sales people, it makes sense to think about financial objectives in qualitative and behavioral terms, not just quantitative terms. This often has the added advantage of turning the irrational fears of having a less than rewarding retirement into an exercise that results in a renewed clarity about priorities. It is often difficult to undergo this evaluation alone, and using a money coach or an advisor can be very helpful.

(This is how you might start:)

In retirement, I see my life this way: (Create a vision of what you want to be doing and where you want to do it?) When people actually sit down and do this exercise they can create a realistic vision. Only after you have a vision can you back into the costs of realizing that vision. People are often surprised about the simplicity they envision instead of the things they will need. The costs of that life style become much more tangible. At that point, the financial requirements can be computed using your personal vision and not some formula created by professional that calculate retirement readiness in dollar terms only…who assume your values match their own needs for multiple homes, luxury cars, and country clubs. The process by which you come to your vision is important because in the process you decide what is really important. At WomensWorth we use an assessment of values and priorities, called “the Quadrant” to help our clients identify what they must do now and later, and what they want to do now and later. This helps them determine what will be important to them in retirement, and clarifies priorities. Additionally, priorities tend to shift depending on life cycle, and even during the much longer retirement lifecycle many now experience.

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This applies not only to your envisioned goals, but also the assumptions you make about achieving these goals. Is it realistic to achieve the goal you have set using not only your vision, but also considering historical performance of investment and savings vehicles. Many of our expectations and the expectations quoted in the media regarding the compounded growth rated of financial assets became inflated as a result of the rising tide that lifted so many ships during most of the last decade. Setting realistic goals and achieving them can be hard when everyone brags of their "big hit"…. However, I urge everyone with whom I work to set realistic achievable goals, never to try to "beat the market", and if the goals are achieved early, to take the wins off the table and "bank" them. Usually this is done objectively by having the right allocation of assets given time horizons and expectations, and revisiting this allocation at least annually. Only in this way can you avoid "staying too long at the fair", or behaving emotionally in either an over-exuberant or overly dismal environment.

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Question # 3- Am I a Do it Myselfer or Will I Delegate my Decision-Making?

Or will I do a combination. Am I going to create and execute my own strategy? Or am I inclined to learn more before doing it on my own? Many investors delegate due to time constraints, lack of expertise or anxiety about decision making. Many people are overwhelmed by how much there is to learn before making educated decisions. Financial issues are the ones that often end up in the procrastination pile…you know that pile of papers where all the things you HAVE to get to linger…. like the 401K statement that you must address to make sure you have the right investment selections, like the offers to refinance, like the lower interest rate offers on credit cards? Sound familiar. You have the best of intentions, but somehow they just keep getting lower and lower in the pile. You probably postpone these financial tasks because they involve making decisions you are not completely comfortable making. The decisions have consequences. But there is a little voice saying (I should do this, I can do this, I can handle this, I don't need to pay someone to help me with this.) This is not an unusual voice, since many of the available resources to help us are not unbiased and we question the value of their advice. So we are often caught in that no-man's land intending to proceed on our own, and knowing that if we could tap into some good advice we might move the process along. The most important point here is to recognize that you do not need to delegate completely. Usually a combination is the right answer…somewhere in the middle.

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Question # 4-How Do I Become a Smart Consumer?

What do I need to know? I liken this to the trend in awareness among women concerning issues of their health and health care. Scrutinizing and asking the right questions about medical care is a great model for being a smart consumer of financial services. Many women tell me that they glaze over when figuring out the right questions to ask. The most important questions are: What are the costs? What am I getting for my money? Is the vendor legitimate? What's in it for them? Do I feel comfortable? Is there a nagging feeling? Do I feel like I don't know enough to make an educated decision? Do I need to ask more questions? Unfortunately, most providers of financial services are also manufacturers or distributors of financial products, and are employed in companies whose business models reward them, first and foremost, for selling those products. There are many costs hidden, or not fully disclosed, which makes the sale of the product profitable to the company and to the salesperson, who is often referred to as an advisor or consultant. In my 30 years in the industry I have been amazed at how often even the "advisors" (stockbrokers, insurance agents, etc.,) selling the product directly to consumers were unaware of the many “hidden” costs there were along the supply chain from manufacture to delivery to the end client (you). These costs are often disclosed in documents that no average person is inclined to sit down and read with a magnifying glass. There are so many methods of distributing product and compensating sales forces that it is often impossible to evaluate. It can feel like a catch 22 because the traditional sources of information are not rewarded to disclose all the information, even if they know it. The important question to ask is: What is the relationship between the person advising you and the manufacturer AND what is in it for them IF you purchase this product or service? Are there any other ways you could purchase the same product, or execute the same strategy at a lower cost? Comparison-shop if you can or seek the advice or second opinion of an unbiased person.

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Question # 5-What is the Worst Case/Best Case Scenario?

Only by assessing this, can you evaluate your feelings towards risk and what your comfort level will be? No matter how much a particular investment vehicle or strategy is touted, you must ask what is the worst that can happen? If you can't pass the "Maalox" test (does the worst case scenario cause an upset stomach?), then you probably should adopt another strategy. Again, my experience here is that traditional financial information providers do not accurately link individual investors with the true worst case scenarios. Alternately it's as important to evaluate the risks of NOT executing a strategy.

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Question # 6-How Do I Monitor My Strategy?

Once you have made a commitment to a particular strategy, complete with understanding your objectives and goals in terms of appreciation, return, risk, etc. you need to monitor it YOURSELF. No matter how well-intentioned your advisor, his/her first priority is to generate more sales and revenue, and often they do not or cannot pay full attention to YOUR holdings. You must ask yourself these questions about your investment: Is it meeting my expectations? What are the reasonable frequencies for evaluating? What is my time frame? Is it long-term or short-term? When might I need to tap some of the money? Be really specific about what the time horizon is. Quantify it. Setting specific time frames allow you to know when and how often to evaluate the performance of your strategy. There are issues related to liquidity that influence whether or not you should adopt a specific strategy in the time frame you have set. Many advisors often fail to specify timeframes, and investors have inadequate benchmarks about how to monitor their outcomes. If you are lucky enough to reach your performance goals before the time allotted, the strategy should be reversed NO MATTER WHAT. It is just as important to know when to walk away due to UNDER-performance. Often investors live with their mistakes for too long because of the financial and emotional factors involved in "cutting losses." Consequently it is important to determine the costs of premature liquidation BEFORE entering into an investment strategy. Perhaps it will be much easier to walk away from a mistake if you realize that everyone, even professional portfolio managers, make mistakes nearly 50% of the time.

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Question # 7- I Know How To Communicate My Financial and Investment Goals?

The more articulate you can be about your time horizons, your appetite for risk, your need for liquidity, the less you have to depend on the judgments of the sales people (and make no mistake, the majority of “advisors” in large banks, brokerages and insurance companies ARE salespeople) who are rewarded for selling specific, profitable (to the company and to themselves) products. I think many a land-mine would be avoided if investors decided before they entered a financial services institution what vehicle will best help them achieve their goals, and used the offerings of a particular institution after comparison shopping or seeking second opinions.

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Question# 8-Do I have a System for Organizing my Financial Affairs?

Yes I mean a filing system or a spreadsheet or computer applications. (Quicken? Microsoft Money) How many times have you wanted to take action, but got delayed because you couldn't find the right statement or piece of paper necessary to execute? Many clients report feeling overwhelmed by all the paper. I often wished I had the paper and postage concession for a financial services company. A simple solution is to create a binder with tabs for each of the financial accounts you have and putting your monthly or quarterly statements in as you receive them. You can keep the current year's statements in front, and in December of each year archive the prior year's "stuff". One solution is to think about consolidating not only the paper but also the source of the paper. By consolidating many of your financial assets in one place on one platform or at one custodian, you can simplify and decrease the amount of paper. There are custodians who can consolidate all your IRA's, Roth IRA's, Rollover IRA's, mutual fund accounts, credit card accounts, and checking accounts all into one account. Just make sure you understand the monthly, quarterly or annual fees. They are usually small for the convenience, but just be an educated consumer. And now, more than ever, understand the insurance maximums for each institution and type of account.

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Question # 9-Do I have money HARMONY?

What are my issues around money? Have I confronted them? Do they continue to haunt me? How can I confront them? For many, money is a metaphor for a lot of other primal concerns: power, influence, freedom, status, and for women, especially, security. But getting straight with money can never happen until one understands what money stands for. Ask yourself this question: If I had an excess of money what would I do with it? You will be surprised what the answer to that question will tell you. Often the answer to the question reveals the underlying issue. It becomes clear that money isn't the only way to tackle the issue or concern. The answers change depending on life stage and circumstances. It's good to take stock of that every once in a while…especially at the time of life transitions. What our clients report is that they often reach a realization that while it is certainly better to have too much than too little, having a ton does not offer the solution to the real underlying concern.

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Question 10: What are the Next Steps I can take to get nearer to my goals?

What are the small steps I can take to get me on the road to independent and responsible decision making? What are the steps to being an educated consumer of financial services and products? What are the steps to feeling comfortable about money and finance? There is a continuum of behaviors and tasks which will get you there: Budgeting, Saving, Education, Coaching, Creating an Action Plan...these are all examples of steps you can take on the road to independence and savvy. WealthHealthy Women, Lynne and organizations like WomensWorth have as their missions helping women on this journey. Thanks to Lynne for letting us share some of our tips and techniques with you.

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