Is Your Incomplete or Inaccurate Information Costing You?
About the author: Jeff Martin is a financial advisor at Cornerstone based in Reno, NV. He enjoys being able to help clients create customized strategies for their portfolios based on their unique financial goals.
My wife and I are now roughly 3 months in to parenthood, so I am speaking from a position of significant experience. These last three months have likely been one of the quickest learning curves I have been on to date. I recently saw a comedy clip of a gentleman comparing new parenthood to the Navy SEAL’s BUD/S training. He explains his perspective in that you can likely expect to wake up soaked, not know why, followed by being yelled at, which will continue to get louder, until you get whatever task at hand right. There is a ring of truth to this.
Aside from learning to navigate the looming perils of furniture in complete darkness and silence, I have also learned that much of what I thought I knew, was not based on complete or accurate information. Similarly to parenthood, there is no shortage of information when it comes to financial topics. Here ends the sleep deprived rant of a new father on subjects you likely have no current interest in, and begins, hopefully, some insight from a Financial Advisor that will help you make better financial decisions going forward.
Making financial decisions can absolutely be a daunting and overwhelming task, that will likely have a significant impact on your life. Many of you are very familiar with the gravity that these decisions carry. So why is it that these decisions can have a different result than what we intended? Many times, two extremely important components of our decision-making process were influenced by incomplete or inaccurate information.
When we look at the facts concerning financial investments we define two things, critical and sound. Critical means something significant, factual, important and relative that you must know about before making a financial decision such as taxes, fees, costs, risk, or a myth or misconception. A sound investment means two things are in place. First, what do you want or need your money to do for you? Second, you must know all critical facts and information about any investment to determine if it has a high probability of accomplishing what you want. When this process is interrupted, incomplete, or inaccurate is often when the result comes as a surprise and can cost you significantly.
Exploring this critical definition further, how often are decisions made with only some of the critical information, or perhaps a misconception that we have created in our own mind? In my experience, much more often than it should. If there was additional, critical information available, or true facts to clear up a misconception when would you want to know about it? Before jumping in to it naturally.
Moving on to a sound investment. The focus is often put on which financial tool should be used rather than beginning by asking, what do I want/need this money to accomplish? Once you can clearly outline the purpose, you can then move to selecting the appropriate tool to get the job done, not the other way around.
The process that begins by getting a very clear understanding of where you are currently, and where it is you intend to go is a complete necessity. Here in lies the birth of your financial plan and road map. The assimilation of these two components, in conjunction with allowing the critical information not only to surface, but also to be used, leading you to your decision tends to have a much higher probability of success.
Aside from not allowing incomplete, inaccurate information, or a misconception influence your decisions, I leave you with this: always, always pack an extra binky.