Little answers can solve the big question

  • Article by: ROSS LEVIN
  • Updated: August 27, 2011 - 9:19 PM

A hunger for one answer often exists in the financial planning world. But there isn't one. Rather than try to know the unknowable or explain the inexplicable, what if you got some key big things right by doing many little things right?

Everything my wife and I could have wished for just happened, and we were incredibly sad.

We dropped our twin daughters off at their colleges, said our teary good-byes, and they walked away into a new stage of their lives.

We are no longer primarily responsible for their well-being. Choices will be theirs, as will consequences. They will have some great experiences and others that may shake them to their core. We will still be there for them, but we won't be there with them. We are learning this new role as we go.

As with all families, there were so many things that affected our kids over which we had virtually no control. There were a few things that we really could emphasize: family meals, fun experiences, volunteering. But there were many other influences and influencers that also had an impact on them -- good and bad. Wouldn't it be great if we all could wrap everything up in a neat little package and say "This is why things turned out the way they did"?

I see this hunger for one answer often in the financial planning world. But there isn't one. Rather than try to know the unknowable or explain the inexplicable, what if you got some key big things right by doing many little things right?

Big Question 1: Will you have the money you need when you need it? This question has three components -- savings, investing, and spending. One of our clients is completely obsessed with market fluctuations and is the perfect contra-indicator for buying and selling. He gets nervous when the market sells off and wants to buy more stocks when the market is going straight up. By trying to focus this client on two of the three parts he can control -- the amounts that are saved and spent -- the investment piece will become much less anxiety-inducing. The best way to think about this equation is that if you consider your life expectancy as your time horizon, the more that you are willing to invest in stocks, the less that you will need to save or the more you will ultimately have to spend. Investing has risks that are best mitigated by time and an appropriate asset allocation.

Big Question 2: When you look back over your life, what are the things that you don't want to regret? For most people, this revolves around key relationships and a personal definition of success. While a balance sheet may give people an immediate frame of reference, it doesn't begin to tell the story of what's mattered the most. A much better indicator of how you have done is looking at whom you have influenced, whom you have served, and who you have become.

Big Question 3: What are you waiting for? Life moves on, whether you do or not. One of our clients had a terrible accident on a vacation and spent two years recovering. The client was in a tremendous amount of pain and required numerous surgeries. He is going back to the site of the accident so he can experience it differently. This won't change what happened, but it will influence its long-term effect.

The big questions are answered every day by making many little choices. For example, when the market moves down, am I afraid? This fear may affect how you view your job, your possessions -- even your outlook. Is it worth it?

When someone is in need, do I feel charitable? This may be about time demands rather than money, but both are a commodity. When we were dropping our girls off, a friend texted me to let me know that he was thinking of me. That act of charity took a moment and meant a ton.

College is the next big leap for our girls, but whatever they learn there, I know that it will be comprised of many small steps.

Spend your life wisely.

Ross Levin is founding principal and president of Accredited Investors Inc., Edina. His Gains & Losses column runs on the last Sunday of the month. His e-mail is ross@accredited.com.

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