Did you know that most people experience difficulty picturing themselves in the future? When psychologists ask study participants to imagine themselves in the distant future, people tend to see themselves as strangers. Our egos are tightly entwined with who we are now, and even though the future is coming for all of us, it’s hard to see ourselves as ten or twenty years older.
For those of us in the financial planning profession, this can make our jobs a bit more difficult. You might feel as though you’re setting aside savings for a stranger, unless you’re only two or three years away from your target retirement date! Thinking, and planning for, more immediate financial needs seems to make more sense to us.
But of course, we know that failing to plan for the future is a big mistake. If Future You could travel back in time and give you some advice, this is what you would likely say.
The distant future is just as important as the near future. Yes, planning for this summer’s vacation is a lot more fun, because the payoff is coming up much sooner. But you should devote equal attention to both short-term and long-term goals.
Don’t just imagine… Set concrete goals. It’s one thing to imagine retirement; it’s another thing to decide very specifically how you want that retirement to look. Decide upon a few specific goals, such as where you want to live or hobbies you want to pursue. This will help you set aside money for things that actually matter to you.
Be an active participant in your planning. Some people divert part of their paychecks to a retirement fund, but they’re not really participating in the retirement planning process. Investigate your portfolio, become familiar with fees, and seek to understand the performance of your fund selections. You will learn how to make more careful investment decisions.
Diversify Properly. “Future You” might be really happy with your fund’s performance… or perhaps not so much. No one has a crystal ball and since we can not see the future, we must plan for it. This means more than just having your money in several different investments; it means planning for the unexpected and knowing that some potential life events could have a catastrophic financial impact if assets are not allocated properly. You don’t want to miss opportunities, but you also don’t want to risk losses that could have been avoided.
For questions or assistance, feel free to contact our office.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Investing in mutual funds involves risk, including possible loss of principal.