In financial planning, it’s easy to lose sight of the goals when the numbers and strategy often dominate the available focus. But as a family financial planner, I often need to reorient my clients’ focus and rephrase the questions. “Should I take more risk or play it safe?” is better said like this: “What am I trying to achieve, and how do my assets help me get there?”
The answer almost always depends on your goals, your timeline, and, most importantly, your personal economy. Your investments shouldn’t be the goal themselves; they should serve your goals.
Let’s walk through what that really means.
Goals First, Allocation Follows
Six clients called me recently, all with the same market on their mind (this was during some turbulent market days in the spring). Three wanted to invest more. Three were nervous and considering pulling back. But none of those decisions could be made without first looking at what their asset allocation was for!
Were they planning to use it next year for a house or tuition? Or was it earmarked for a long-term goal, such as retirement? Understanding the goals as they lie helps distinguish how the money should be invested and where it should be allocated. When you attach a goal and a timeline to an asset, you move from reacting to headlines to responding with intention. Suddenly, your investment mix has a purpose. It becomes a tool, not a scoreboard.
Financial Goal Setting Helps Avoid Overreactions
For those nearing the retirement red zone (typically five years pre-retirement into the first five years of retirement), emotions often run high. Market volatility can feel like a threat. But reacting impulsively can derail years of careful planning. For those who have a weaker stomach for volatility, a more risk-averse, smoother ride might provide short-term comfort, but how much future return are you giving up to get it?
Volatility Isn’t the Enemy, Misalignment Is
Fear of loss is powerful. Behavioral economists refer to it as loss aversion, which can lead investors to be overly conservative, particularly after periods like 2008, 2020, or 2022 (I lived and worked with clients through both of those, and more!). Some of my best trades, as well as some of my non-trades, occurred during those years.
However, playing it too safe comes with its own risk: a lack of longevity. If your assets grow too slowly, you may need to work longer, save more, or adjust your retirement lifestyle. The goal isn’t a bump-free ride. The goal is to stay on the road long enough, consistently, to reach your destination. And that means matching your asset allocation not to your emotions, but to your goals.
Financial Goal Setting – What Are You Giving Up?
A more conservative portfolio may feel right emotionally, but if it’s intended to fund a 30-year retirement, it might not perform well enough to meet the goal. Conversely, if you’re saving for something in the next year or two, that money doesn’t belong in a high-volatility vehicle. When your goals are clear, your plan can be, too. Let the timeline and purpose of each asset dictate its strategy, not the market’s noise.
Family financial planning and financial goal setting, at its core, is about finding the right balance of enjoying life now without compromising it in the future. It’s about seizing opportunities without creating more opportunity costs. My goal is to help you achieve your financial goals without requiring you to spend time that could be spent enjoying your family now or later in retirement.
Please reach out to me with any questions you may have for planning and goal setting; my door is always open.
