“It is not love that makes a relationship complicated; it is the people in it who do.”
This lighthearted statement seems quite fitting as we ponder our relationships. All relationships are complex because humans are complex. Whether the romantic devotion of a loving couple, the adoration shared between parent and child or even the collaborative camaraderie among colleagues, relationships can be challenging at times, and they require hard work. Our relationship with money is no different, it too requires our attention and dedication.
Like it or not, we need money in our lives. It is a medium necessary to helping us achieve our goals and cannot be ignored. We cannot divorce, disown, or move on from this association. It is a relationship that needs to be cared for, nurtured, and understood so that it can flourish into a prosperous bond.
Whether your connection with money is marked by love, hate, or some combination of the two, we can take steps to make that relationship less complicated. By following the ‘3 Cs’ of conventional relationship advice anyone can simplify the complexities and make the most of this life-long union.
This is one of the most important aspects of any relationship. Communicating your personal objectives is paramount to achieving your goals. Identifying, and clearly stating, what is important to you is the first step. A financial plan is a great tool to document and fully communicate your goals in an organized fashion and aids in creating a solid foundation for good decisions.
With any relationship, there may need to be some give and take. Life can can lead us down an unexpected path, our goals may shift over time, or one goal may take precedence over another. At times we may find ourselves veering off-track from the achievement of our goals. Sometimes, a compromise needs to be made. Conflicting goals and resources may require prioritizing decisions or making concessions that are vital to attaining what is truly most important in our lives. An open conversation with your financial professional can help you make sense of these situations, navigate the journey with you, and may help illuminate creative solutions that will keep you on target.
Deciding that you are truly committed and willing to do what it takes to be successful to reach your financial goals is an important first step. It does take more than mere words, actions will be necessary to strengthen the bond and take charge of the outcomes that are within our control. It may not take place overnight, but with dedication and perseverance over time, we can achieve our desired results.
So, what should a thriving relationship with money look like? It does not matter whether your goal is ultimately a comfortable retirement, putting your children through college, or leaving a lasting legacy, all relationships are personal and specific to your particular set of circumstances. Keeping that in mind, there are some general rules of thumb that you can use to evaluate the current status of your relationship with money. We have identified the following Wealth Planning Targets, and although they are not a substitute for a comprehensive financial plan, they are a starting point for consideration.
- Retirement Withdrawals: 2.5% -3.5% maximum portfolio withdrawals depending on the length of retirement.
If you plan on being retired for 25 years, have an allocation of 60% stocks and 40% bonds and plan to take 6% inflation-adjusted withdrawals, you have a 30-40% chance that your assets will outlast your 25-year horizon. This means that when 1,000 Monte Carlo simulations are run, the assets lasted at least 25 years in 300-400 simulations and ran out in 600-700. A withdrawal rate with a probability of success of 80% or greater is generally considered a successful strategy.
A loving, healthy relationship with money is achievable, it does not need to be complicated. Like every quality relationship, it is worth the work, and doesn’t need to be faced alone. Your financial planner can assist you in maintaining your commitment and managing necessary compromise toward the achievement of your life’s desires. Through the creation of a plan that clearly communicates your goals, accounts for variable scenarios, and provides practical, measurable steps, we can live the life we’ve imagined for ourselves.
Contact Jill Branthoover for more information on this topic.