Envisioning Your Financial Future

Each of us has a different mental construct around what our future might look like financially. Sometimes we cling to largely fictional versions from media advertising or those borrowed from friends. None of these are uniquely ours however and in order to make progress the objective should be our definition of "true success".

Most of the day to day noise in the financial markets along with the advertising and media pundits that surround it focuses on products and performance. In reality, if you save (spend less than you make) and invest for the long term (diversified) while avoiding serious behavioral mistakes you can ignore all the product and performance hype. There will always be new financial products and new "best performing" funds and managers. All that matters very little in terms of your financial future.

A recent study of retirement plan accounts by the global consulting firm Aon Hewitt highlights some of the prevalent behavioral issues. The study starts by saying "there's a growing gap between retirement needs and resources". Despite the main objective of providing some element of future retirement security, an astonishing percentage of participants are either borrowing against their balances or cashing out prior to retirement for immediate financial needs. As the charts reflect, the percentage of retirement plan participants with loans has steadily risen over time to more than 27% in 2010.

The chart that breaks out the loans by age category is even more revealing, showing almost one-third of all participants in their 40's with loans.

It is important to envision a future that is better than the present but this needs to be connected to our actions. Remember that in the hierarchy of importance, our own behavior (how much we save) is at the top. Investment returns, the exact funds we use, etc. pale in comparison.

We are always happy to talk with those that you care about-family, friends, and colleagues. Don't keep us a secret.