Financial Planning Requires a Dispassionate Approach

Our worst decisions as parents usually occur when we lead with our emotions.  As a parent, there are many days when you are tired, have a lot on your mind, or both.  It is in these instances when we say or do something that we later find regrettable.   We know that we could have spoken instead of screamed; we could have paused instead of cut our child off in mid-sentence, and we could have set clear consequences instead of shouting a threat.

Parenting is hard.  You are passionate about your family and want the very best for them.  Of course, how “the very best” is defined and acted upon is the stuff of sitcoms, stereotypes, and grey hair.

What if we could press rewind on some of our exchanges with our kids?  What would we do differently?

When I think of calm under fire, I liken it to an emergency room doctor when a tragedy strikes, a fireman when the bell goes off, or an NFL coach with time winding down in a playoff game among 70,000 screaming fans.  What if we all could parent amid a storm with such coolheaded-ness?

What I think is that the ER doctor, the fireman, and the NFL coach all have passion— just like a parent has passion.  But at times when the heat is on, they can act dispassionately to make clear decisions.

Is it possible to be passionate and dispassionate with your financial decision making?  Does it help to be passionate and dispassionate?

Not only do I believe it’s possible, but I believe it is necessary to have the right perspective.

Like raising children, creating and conserving your wealth is done successfully when you make the right choices about what to be passionate about and what to be dispassionate about.

Let’s review some examples:

Passionate about:

• Answering the questions: What do I need? How am I going to get it? How am I doing?
• Having a cash reserve balance minimum—and sticking to it.
• Having a systematic investing plan—and sticking to it.
• Developing a Target Investment Allocation for your long-term investments and sticking with it when inevitable market drops occur.
• Understanding where financial needs may arise if you became disabled or died prematurely—how to cover them.

You can see that sticking to a plan and a process you’ve put in with a non-emotional methodology is key.

Dispassionate about:

• Short-term market volatility due to geopolitics. I wrote about this in Billy Joel and Market Volatility
• Articles on the internet that you come across about the next hot company to invest in.
• Interviews on financial news segments from people that give you the impression they know what the market is going to do in the future.
• Getting your financial decisions perfect. This is impossible due to unknowns.  Success comes from stacking good decision upon good decision over the years—not from perfect decision-making.

Raising children is much like creating wealth.  Like investing, you are not going to get every parenting decision right, so don’t beat yourself up. I hope no one judges us by our worst parenting decision or our worst investing decision.

You likely won’t see the results of your “work” for many years, and in the middle, you will examine your decisions a lot.  You’ll question yourself because there are so many things you don’t know or can’t control.  But, if you make reasoned decisions based on a long-term view, you, your children, and your finances will be better off.

I make a promise to my clients, when it comes to their finances I will be as dispassionate as the best ER Doctor can be in times of chaos and I will stick to a non-emotional methodology for them.

Author: David Jeter, CFP^® | Allegheny Financial Group | May 2018

Allegheny Financial Group is a Registered Investment Advisor. Securities offered through Allegheny Investments, LTD, a registered broker/dealer. Member FINRA/SIPC. The above comments are provided for discussion purposes only and are not meant to be an offer of any specific investment or tax advice.