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Smart Money: What successful financial planning looks like

I see people do reckless things with their money all the time. They raid their retirement savings for a trip to Disneyland. They take equity out of their house to buy an expensive, but depreciating, toy that they will seldom use.
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Brad Brain: "The essence of financial planning is doing the things that you need to do in order to be in a position to do the things that you want to do."

brad-brain​I am seriously considering a big-ticket luxury purchase. And the nice thing about not having a spouse is that there is nobody to tell me I can’t buy it. Is this a mid-life crisis? I don’t know, and I don’t care.

But I had someone say to me, "Aren't I worried that people will think the wrong thing?” There are three reasons, which I will share in order of importance, why that does not bother me one bit.

First, and probably least important, is that I am not trying to impress anyone. I am considering this purchase for me, not for what others think.

Second, and more important from the client’s perspective, it may be a lousy criteria to choose which financial professional to work with based on that professional’s lifestyle. This goes both ways, either choosing to work with someone, or choosing not to work with someone.

Here’s what I mean. Let’s say you based your choice of financial professional on the type of house that the advisor lives in or the type of car that they drive.

Warren Buffett is the World’s Greatest Investor and one of the wealthiest humans to exist on earth, ever. But for years he lived in a modest house in Omaha, Nebraska, and drove a second-hand Volvo. Imagine choosing to pass over an opportunity to invest with Buffett because he did not drive a flashy car. Big mistake.

On the other hand, if your advisor drives a Ferrari that doesn’t make them a good advisor. It doesn’t necessarily even mean that they are good with their own money. There are plenty of examples of people who live an expensive lifestyle, but don’t have actual wealth, or even financial security. We call this situation “big hat, no cattle.”

But both these reasons are secondary. The real reason that I am not worried about what people think about me as a financial advisor if I make a big-ticket luxury purchase is that anyone who did think along those lines is completely missing the point of financial planning.

The essence of financial planning is doing the things that you need to do in order to be in a position to do the things that you want to do.

So, yes, after being careful with my money for three decades I can afford nice things. Thirty years of planning and achieving good returns on my investments adds up. I am not apologetic about that.

As an advisor I see people do reckless things with their money all the time. They raid their retirement savings for a trip to Disneyland. They take equity out of their house to buy an expensive, but depreciating, toy that they will seldom use.

Here’s the vital difference. If I do move forward with my big-ticket luxury purchase, and at this point I think that may be inevitable, I won’t need to give up anything important.

I won’t need to dip into my retirement savings or my kid’s education fund. I don’t need to cash in my TFSA. I would be spending a little bit of my kid’s future inheritance and I am totally fine with that. There would still be more than enough left over for them when I eventually go.

Buying nice things at this stage of my life is not reckless. Reckless would be buying big ticket luxury items 30 years ago.

Buying nice things now is not irresponsible. It is harvesting the seeds that I planted many years ago.

That’s what successful financial planning looks like.


Brad Brain, CFP, R.F.P., CIM, TEP is a Certified Financial Planner in Fort St John, BC. This material is prepared for general circulation and may not reflect your individual financial circumstances. Brad can be reached at www.bradbrainfinancial.com.