Implement Financial Recommendations that are based on your Specific Objectives

Anyone who has gotten married or gone to a gym knows that others enjoy providing unsolicited advice.

And the majority of their advice is based on what worked for them, and not necessarily what is best for you. Imagine if doctors also did this and only gave health recommendations based on what they do for their personal health – would you listen? Unfortunately, this also happens with financial advice. Friends, family, and coworkers are sometimes eager to tell you to do what they did without asking any questions about your cash flow, taxes, objectives, debt, risk tolerance, or time horizon.

Financial planning is a customized process to help people accomplish multiple objectives with limited resources. And the more limited that your resources are, the more realistic your objectives need to be. In an effort to help people be more successful with their financial decisions, I follow a 4-step process during my initial engagement with clients:

  1. Review your current financial strategies.
  2. Identify your current and future objectives.
  3. Determine if your current financial strategies can achieve your objectives.
  4. Provide recommendations and action steps to make adjustments and help you achieve those financial objectives.

Following this 4-step process makes my annual reviews with clients more effective because we can measure their progress for each of their objectives. If you are not sure how to get started with financial planning, answer the following questions to help you identify some objectives:

  • How much money would you like to have in liquid savings for emergencies and opportunities?
  • What is your monthly retirement income goal?
  • How long could your family maintain their lifestyle if you lost the ability to earn income?
  • What percentage of your children’s college expenses do you want pay for?

And make sure that your strategies are flexible because we all know that your priorities can change quickly as life events happen. One way to create flexible financial strategies is to split your objectives into three categories: short, medium, and long-term objectives. For example, if two of your objectives include not using credit cards for emergencies and saving for retirement, then make sure you have enough liquid savings. This way you won’t have to take withdrawals from your retirement account for short-term emergencies, which will give your retirement savings more opportunity to grow to meet your long-term objectives.

When it comes to unsolicited financial advice, the topic that I hear about most often is coworkers telling each other not to participate in a 401(k) plan if the employer doesn’t offer a match. Before providing this 401(k) advice, did your coworkers ask you about your objectives, your personal tax situation and your retirement account balances, or do they only save for retirement if there is “free money” (matching contributions) available, and want you to do the same? Holding out for “free money” can be a detrimental strategy if you never work for an employer that offers matching contributions.

And, did your coworkers consider that catch-up contributions are available for participants age 50 and above because many people feel behind on their retirement savings? Don’t delay, start today, and take action on your retirement savings objectives. Participating in a 401(k) plan might be one of the best retirement accounts to contribute to if the tax benefits of 401(k) plans are in-line with your personal financial objectives. If you are looking for additional tax deductions, where else can you contribute up to $18,000 or $24,000 (depending on your age) for retirement with pre-tax dollars? For people in high income tax brackets, these pre-tax contributions could have a significant impact on your personal income taxes and your progress toward your retirement savings objectives. And 401(k) contributions are automatic through payroll deduction, which is beneficial because you can accomplish your retirement savings objectives every pay period before any discretionary spending.

Many people use a search engine, attend a seminar, or talk with friends, family or coworkers to obtain financial information, but most of this information will be general and not based on the specifics of what you’re trying to accomplish. Instead, work with a financial professional to develop a customized plan that is based on your specific objectives. A financial professional can help you develop, implement, and monitor this plan so that you can make progress toward your objectives. If you don’t have one, get connected with a financial professional in your area, or follow me on Facebook or Twitter.


Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Co (except in NY), Principal Life Insurance Co. Securities and advisory products offered through Princor Financial Services Corp, 800/247-1737, member SIPC. Principal National, Principal Life and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392. T15111702lk