Drive for show, putt for dough. Many people may have heard this golf analogy before. Basically, it is saying it is sexy to hit your drive into the next town but if you want to really make money you have to putt well. Unfortunately for many of us, we fall into the trap of having the desire to be sexy.
When it comes to our personal financial plan many of us have taken the exact same approach. With the way the stock market gets idolized for its terrific gains, the housing market – how it can never lose, and now gold with how it’s going to continue to go up in value because the ultimate decline of the dollar and how “everyone is scared and needs a safe investment.” Although things and people say certain avenues are safe for investing please understand that there is also significant risk in all of those avenues. Now, I’m not saying to not invest in any of those places, but I will say there is a time and place to do so in your financial plan.
In creating your financial plan what most gets overlooked tends to be the base or the foundation which you actually build your plan on. You wouldn’t go out to Home Depot and purchase everything you need to build a home and start building it on the ground without a foundation, would you? Consider your financial plan just like building a home. Your foundation needs to be strong and able to stand and hold up your building or plan; otherwise when something unexpected comes along, your building or plan may not be able to withstand the unexpected.
The unexpected is what hurts most people on their way to retirement. It is not that they fail to plan; it is that their plans fail because they didn’t know what they were building their plan on. I also get the sense that most people have an ideological idea of what retirement will be like. They have built up a wealth of investments with no idea how to tap into those investments to start living off them. It is almost as if people think that retirement will be one big vacation, but it’s not. However, with the proper planning it could very much seem like one big vacation. The time to start is now.
Take a look at the Financial Planning Pyramid (http://1.bp.blogspot.com/_oBNr8JhFXIU/SsE3MykGaCI/AAAAAAAAABM/eAsVndC4bQ4/s1600-h/wealth+pyramid.jpg) to start to take inventory of what you already have in place. If you don’t have your base or foundation covered, perhaps you should consider stabilizing your plan. Remember, if your plan isn’t strong enough to hold up when the unexpected comes along, you are essentially driving for show, but not managing to score well with your putter.