Your spouse found a renovated lake house. The property’s beautiful, and the price is nice. But when you mention current interest rates and the risk of taking on more debt, you hear, “Babe, c’mon! Life is short. This is our chance to build some memories with the kids. Besides, if we don’t pull the trigger—and fast—someone else is going to come along and snatch this place right out from under us!”
You’re wondering what to do. What’s the smart choice?
Tell you what…let’s meet back here in twenty years and I’ll let you know what the right decision was.
Until then, you are left with the classic quandary of opportunity vs. risk.
When you say “yes” to one opportunity, you are effectively saying “no” to other options. And one of those other options just might lead to an even better future. Therein lies the risk.
With most financial decisions, we have a pretty good idea upfront of what our choices will bring (in this case, a lake house and all the fun that can give). What we can’t know is all the future opportunities we’ll miss out on because we said “yes” to this particular option.
John Mauldin put it this way, “…the choices we make today are constrained by the choices we made in the past, and the choices we make in the future will be limited by the choices we make today.”
This truth can be paralyzing. But indecision is never helpful. To refrain from making a choice (because you’re frozen with fear) is still to choose…only with no thinking or acting required.
Once you realize that today’s decisions shape tomorrow’s opportunities, it’s good to ask questions like “How might today’s choice limit my choices tomorrow?” and “What things am I hoping to do later that I might not be able to do if I say yes to this opportunity?”
This is where a holistic financial plan comes in. Such a plan gives you a 30,000 foot view of both your current reality and your future dreams. It doesn’t necessarily lock you in, but it does give you direction and help you keep your priorities in view.
Suppose you wanted to visit an old college roommate who just moved to Onalaska, Wisconsin. Your friend has a milestone birthday coming up, and you’d like to spring a surprise.
If you’ve never been to that part of the country, how would you get to Onalaska without some kind of map app? And without a travel plan, how would you know if you have time along the way to squeeze in a little sightseeing—and still make it in time for the big birthday surprise?
A holistic financial plan acts like a good map and travel itinerary. It shows you how you can reach your desired financial destination at just the right time.
The point? Before you buy a lake house (or make any other big financial decision), make sure you have a map and plan. Weigh the opportunity vs. the risk. Your future self will thank you.
And speaking of your “future self,” what kind of retirement income plan have you got in place? Most people do a great job of accumulating retirement savings, but fail to think about how to turn that “nest egg” of assets into regular income that will fund their next chapter?
If you haven’t begun that important process, I have a free gift for you. It’s a 5-minute inventory called the RISA (which stands for Retirement Income Strategy Assessment). The RISA quiz can help you find a retirement income strategy that fits your situation–and personality.
Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.
