The Three Buckets Principle

Recently, I followed up with a client after the client had been away on a family vacation for two weeks. Prior to that trip, the chaos of summer, work travel, and meetings had prevented the client from following up with me on a minor but impactful recommendation I had encouraged the client to consider in our last conversation. Before I had the opportunity to even say, “Hello,” the client apologized and communicated that I was owed a phone call. Yes, I had encouraged a decision knowing the impact would further strengthen the client’s financial situation, but in my diligence, I didn’t expect a phone call. The definition of diligence: careful and persistent work or effort. I love the simplicity of this definition and the use of the words persistent and effort. From knowing the client, I know the client is incredibly diligent in her own work and personal life. You see, when my client picked up this phone call, and the diligence of my follow up had just replaced the client’s call, eased the burden of the client having to call me back (amidst her intense work schedule), and ultimately resulted in the client making a best decision to improve the efficiency and effectiveness of her plan after re-clarifying the client’s priorities and current time frames.

An ongoing and sound financial plan requires an immense amount of diligence. If you are not ready to double down on this level of diligence on your own, why not hire a Decision Coach and Certified Financial PlannerTM professional to sprinkle the entirety of your plan with some diligence? Have you rebalanced your 401(k) lately? Have you increased your contribution percentage after your last raise? Did you update your life insurance planning after you moved into a new home after your second child was born? Are you planning on saving for that dream trip to Europe, or is that just going to magically happen in the next five years? What are the trading fees on your brokerage account? You have given thought to each of these questions. You have even discussed the answers with your spouse or close friends. Yet, you are busy and these action items are on the top of your priority list on a Tuesday. All of these questions require thoughtful planning with ongoing diligence, communication, and action. As soon as you settle into a plan with the right cash flow, life happens and you will need to adjust the game plan. My client didn’t forget to call me back. My client wanted me to call me back. Yet, my client didn’t call me back and didn’t make up her mind, until I called. Was I upset that I had to follow up several times? Was I frustrated my client seemed non-responsive? Of course not! It’s my career and joy as a Decision Coach. It’s part of my role as your financial planner to be diligent, to hold you accountable, to help you make qualitatively better decisions over time. Do I expect this to take a few follow up calls and three incredibly productive and ongoing quarterly progress checks between annual reviews? Of course! I love crafting a game plan for you. I love when you approach a financial decision and prior to making a decision, you reach out to me. I want your plan to be dialed in, so ultimately, you are living the life you want now, saving for the life you want in the future, as I provide the guard rails of diligence all along the way. A lot happens in a year and all of those little decisions have a significant impact over a long arch of time. Why I am so diligent with your financial plan? So, you don’t always have to be…don’t apologize, let’s just make the next best decision together and I’ll handle the follow up so we can one day celebrate together, not just because you are retiring, but because of the life you lived to get there.

Recently, I came across two competing headlines: “Dow Dropped Because the Wheels are Coming Off” and “The Dow is Up Because there are Flashes of Optimism.” On any given day, financial markets swing—one-day values are up and the next they are down. Trying to figure out how to build your wealth by focusing on market ups and downs can be overwhelming. I choose to champion an altogether different approach—behavioral finance. I believe the key to long-lasting financial independence lies in individual behavior inasmuch as it does the markets or various investment tools. Knowing that success lies within you – your choices, your responses to the market, and your long-term habits over time – rather than in the whims of the market, keeps you on the road to financial freedom.

Dangers to your wealth aren’t so much the downturns in the market as they are your own biases and emotions. Behavioral finance requires discipline and rational thought processes which can present challenges for many investors. We may feel obligated to put our kids through colleges we really can’t afford. Keeping up with the Joneses can deplete our savings or prompt us to invest in things that aren’t aligned with our long-term financial plan. And, in times of stress or change, we may be tempted to react by pulling our money out of the market or by doubling down on an investment. Such actions might play out well in our heads but disastrously so in real life. Ultimately, behavioral finance shows us that individuals carry much of the responsibility for their own financial success.

When you assume this responsibility, it becomes clear that you also gain control of your financial future. You have the ability to build wealth and establish a sense of security without worrying about the market. After all, it is the plan and the decisions you make (or don’t make) that have the greatest impact on your journey to financial independence. So, you may wonder, how do I embrace this concept of behavioral finance? First, you have to do some analysis – predominantly on yourself. What kind of spender/saver are you? Is your money going towards your goals and values? Are there steps you should take to limit habits that lead to unhelpful emotional responses? Besides self-reflection, you will need to create a financial plan. Whenever you are tempted to pursue a course of action, pause, and make sure it is in line with your plan’s goals. If it’s not, you must weigh the risks against the rewards. For those situations that require deeper insight, another great tool is a trusted financial advisor. Their expertise and guidance will be an invaluable resource as you strive to build wealth and turn your dreams into reality.

You have a multitude of tools at your disposal once you realize that financial independence is yours to create. It will take work, discipline, and time, but with that comes agency and autonomy. Start planning now so you can start making the decisions and exhibiting the behaviors that will set you up for a prosperous future.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.