When talking to people about their financial situation, I often hear ‘I need to look at this more often’. But I’m not sure that’s the answer. Some people may need to spend more time working on their financial situation, but I think for most people it’s just a matter of using the time they already spend focusing on the right things.
This ties into the law of diminishing returns. Exercising for an hour a day is great for you. But exercising for 6 hours a day isn’t 6 times better. In fact depending on what exercise you are doing, it can actually be worse for you.
Some valuable uses of time or focus are:
A. Working out what your goals are. When do you want to retire, how much will you need, etc.
B. Making sure you have a good grasp on your current situation. What are your living expenses, what assets do you have, how much spare cash flow do you have, etc.
C. Working out what you can be doing right now to move you from A to B.
Everything else is noise. Especially things that you can’t predict, or where you can’t do anything with that information. Pretty much all financial news falls into this category. If you have a well thought out, long term financial plan, knowing that the ASX is down 100 points, or that unemployment has risen by 0.2% just doesn’t help.
Step 1 is to stop wasting time on the ‘noise’.
Step 2 is to make sure you are spending enough time on A, B, and C. This is where we come in. Working out your goals, getting a clear picture of your current situation, and coming up with a plan that you can stick to is a relatively painless process when working with the right person.
If you have a Financial Adviser, they should be spending most of their time on things in the first group. And most things on that list can be done by you either in your review meeting each year, or with only a couple of hours of work afterwards from you. Having the right Financial Adviser should help you save time not just in handling administration for you, but more importantly in making sure that you are only spending time on the things that you really need to focus on.
Written by Dallas Davison.
Dallas Davison, Michael Hogue and Ali Hogue.