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San Clemente Journal

A Holistic Approach to Managing Your Money

Nov 30, 2006 10:04PM ● By Don Kindred
by Michael Vandenburg, CFP®

For some people, managing their money means one thing…to make more money. Making money is great, but many people these days are starting to ask some very smart questions like, “What do I want to achieve in my life and how much money do I need to do it?” Saving money and making that money work for you is expected, but there is more to life than money. Everyone has different goals and it could range from cruising the country in an RV, to traveling the world first class or simply spending as much time with their loved ones as possible. If your goals are deeper than just how much money you can accumulate, a more holistic approach may be just what you are looking for. Call it Life Planning, Wealth Management, Financial Planning, or whatever you want, but a holistic approach to managing your money involves the seamless integration of your investments with your life’s goals and dreams.
Everyone has heard the saying “measure twice, cut once”. Usually this is reserved for construction, but the same practice can be applied to managing your money. A holistic approach involves planning first, and keeping that plan at the forefront of your investment decisions. When it comes time to make new investments you can look back to your plan and ask yourself how this investment fits into your portfolio and your long-term goals. I have often had people ask me if a particular stock is a good buy…it doesn’t really matter which one, the point is that it may be good for some people and not for others. There is no one size fits all when it comes to your goals and the same should be applied to your investments. 
If planning for such specific goals seems a daunting task to you, it is, but it is also well worth it. This task may even be worth a weekend trip somewhere where you and your spouse can spend the time you need to discuss everything…and have a little fun at the same time. A holistic approach involves planning for your specific, time-bound or consumption-oriented goals. A goal of being financially independent is not good enough for this type of planning. You need to dive deeper and figure out just what does that mean to you. Get as specific as possible. If you have trouble getting deeper answers then try asking yourself why something is important to you. Keep asking why until you can’t go any deeper and then you 
are there. 
It may seem silly to some people to plan for such specific goals when life changes so often but what you get out of this is far more than just goals. You will also get a better sense of your values around money and family. As you learn more about yourself, your goals may actually change. The planning involved in the holistic approach should be flexible…as your life changes, your plan should be changed to accommodate it. I believe many people have this part of planning backwards. What most people do is plan their investments around what the current trends are in the stock market or what the next hot sector will be. They spend their time chasing returns and trying to get better performance results. What they end up with is mediocre results at best, and a lot of stress about whether or not they are in the right sector of the market or what their next move should be. There have been numerous studies on chasing performance and timing the market and the overwhelming conclusions have been that it is nearly impossible over the long run.
What people should be doing is investing for their long-term goals and only changing their portfolio as their life changes. The individual positions may change occasionally, but the allocation and the risk involved should remain constant. 
If this sounds like something you were looking for than you need to do a few things. The first is to set some time aside to really talk through this with your spouse. Take as much time as you need, but don’t spread the time out over a long period, it will never get done. Take a weekend away or maybe just spend a couple hours every weekend for a month discussing your goals in detail. Once you have everything decided, write it out in a format you can use as a reference for making future decisions. Use this as a deciding factor when making your investment decisions. Remember, just because you hear someone talking about a great investment they have doesn’t mean it is right for you. Ask yourself whether or not the investment fits into your portfolio from a risk standpoint as well as if it keeps you on track for your long term goals. The last thing you need to do is monitor your investments and make sure they keep you on track for your goals. Go over your written plan annually to see if anything has changed or is expected to change soon and make adjustments when necessary. Then go on living and enjoying your life the way you want. 
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