January/February, 2012
By Michael Kalscheur, CFP®
Senior Financial Consultant, Castle Wealth Advisors, LLC

Each year we think of things that we want to do or change in the upcoming year (how are yours going so far?). The following are the ten most popular New Year’s resolutions:

  • Lose weight/exercise more
  • Quit smoking
  • Further our education
  • Eat healthier
  • Get out of debt/save more money
  • Drink less alcohol
  • Take a trip/vacation
  • Reduce stress
  • Volunteer more
  • Spend more time with the family

Your resolutions might be slightly different, but looking at these “Top 10,” there are several interesting themes: Most of the resolutions are completely under our control. We control how much we exercise, what we eat and drink and what we do with our free time. Losing weight and quitting smoking may be more difficult, but they are direct results of things that we control.

Another observation is that while the resolutions may be ego-centric, they do have priorities in the right place. Self-improvement; quality time with loved ones; helping other people are important priorities for everyone to have (did you notice that money is only mentioned once?).

As someone who spends a great deal of time thinking about money, this struck me as particularly insightful. When we work with clients, very rarely do they tell us, “I want to accumulate $5 Million.” Most of the time, it is “I want to retire with a nice standard of living. How do I do that?”

In order to retire with enough money to do what you want, you must establish a goal and a plan to reach that goal.

The first step to achieving a goal is to visualize it. Write down the goal, not as the numbers needed to get there, but the vision of what “there” will look like.

“Retiring at age 65” is a common retirement goal, but how can you get excited about that? What about, “Retiring to our vacation home down south, traveling on occasion, hosting our grandchildren and generally enjoying our time together, when we are not keeping active with local charities and other groups.” Now that is a vision. That spells out priorities, activities and something to look forward to. It is something to work towards; something worth sacrificing now to accomplish in the future.

This vision is also time agnostic - it could happen at age 62 or 67 just as easily as age 65. This gives you much more flexibility when planning for retirement and eases the undue burden of having to hit a specific date. If the stock market crashes the month before your 65th birthday, you could still accomplish your vision. Not so when you are confined to an arbitrary date on the calendar.

The second step we have already alluded to – write out a plan. This is where you have to take the vision and break it down into parts to see how to accomplish it over time. This seems like a simplistic part of goal setting, but it is extremely important. It is a proven fact that people who write down their goal(s) are much more likely to accomplish them.

Third is reviewing your progress on a regular basis. This makes sense, as the more often we think about something, the more likely we’ll be to stay on track. It also allows us to quickly take corrective action if we stray too far from the plan. Finally, it forces us to continually review the plan and the original goal. As you progress towards your goal, you may find out that your original goal has changed.

No matter what, it is good idea to have an accountability partner – someone to check in with to keep you honest. For investments and retirement planning, it would be your financial advisor. For losing weight, it might be your personal trainer, a friend or co-worker. Anyone that will check in with you on a regular basis to make sure you are staying on track and get you through the tough times can help.

The fourth step in setting and reaching a goal is to have conviction and stick with something even when things are hard.

Achieving a goal is much like investing; it is a long-term process that takes commitment and planning. I recently came across a behavioral finance presentation that showed investment performance of long-term investors with low turnover vs. short term investors with high turnover in a portfolio. The low turnover portfolios outperformed their average turnover portfolios by about 1%. However, high turnover portfolios significantly underperformed both low turnover and average turnover portfolios, by 6% and 5% respectively. This shows that people who stick to their guns, even when things look bad, are eventually rewarded.

This rings true in our industry as well - successful investments are those made with conviction and are based on factual and/or historical information, not guesses, rumors or feelings. For example, if you are considering buying Apple because the stock is “going up like crazy,” that is not conviction, and when the stock price goes down (which it will), you will be tempted to jump ship and sell out of weakness.

However, if before you purchase the Apple stock you researched their products and observed that “Every person I know either has an Apple product or is thinking about getting one,” or “they have the best products on the market,” this would be a statement of conviction. When times got tough and the stock lost value, you would be able to go back to the original reason you bought the stock and have conviction in sticking with it until it rebounds.

That being said, the more you think about saving for retirement as a long term goal that you visualize, measure, write down and pursue with conviction, the more you stand to succeed.

Michael Kalscheur, CFP®, is a Senior Financial Consultant at Castle Wealth Advisors, LLC. Castle specializes in helping families and closely-held business owners with strategies to protect and transition family assets from one generation to the next. Castle’s senior partners also work with clients throughout the country in making logical decisions to help them fulfill their personal and business financial goals. For more information visit www.Castle3.com, call 1-888-849-9559 or contact Michael directly at .