Let's call a spade a spade. I am a messy guy.
Here's how bad the mess can get. Molly Maid cleans my office, and I am going to hire them to clean my house too. But before I have them start, I need to tidy up a bit. Think about that for a moment. I need to clean my house before I let the maid service commence with cleaning my house.
Given that, I'm sure that you can picture that my truck is a mess too. There are a couple of contributing factors. With winter everything is gucky, of course. Slushy snow on the floor mats, road grime on the exterior. But also my kids are ages 4 and 6, so you just know the backseat is full of toys, wrappers and single mittens.
So is this clutter in my truck a big deal? Well, it all depends.
If I was going to enter my truck in a show-and-shine competition, then yes, the mess is a big deal. But winning a show-and-shine is not my objective.
There are other things about my truck that are far more important to me. Safe, comfortable and reliable transportation for myself and my family. The ability to navigate in our northern climate. Being able to haul water for the horses without getting stuck in a snowy pasture. Reasonable operating expenses. These are the things that I care about.
The thing about it is, the messy part of the truck is what you see. It's harder to see the safety and reliability. The mess is in your face, demanding attention. And if you let it, the mess can be a distraction from what is actually important.
The purpose of this little anecdote is to draw the distinction between options, distractions, and objectives.
I do have some options with what to do about my messy truck. Obviously, selling a truck purely because it is a little dirty is just silly. In other circumstances, however, the silly options can be harder to identify.
So, in a world with an overwhelming amount of options, and with innumerable distractions, how does a person make good decisions?
The process is actually very simple. Don't focus on the all of the things that you can possibly do; these are your options and you can be paralyzed into inaction by information overload. Don't focus on all the reasons why you shouldn't do something; these are often the distractions, and can take your focus off of what is truly important.
Instead, focus on what you want to accomplish. As Steven Covey says, "Begin with the end in mind."
You see, if you understand what it is that you are trying to accomplish, then you can quickly screen out all of the things that are not consistent with your objectives, and make good, informed decisions that move you closer to whatever it is that you are trying to do.
Here's a practical example. I was talking to my buddy recently. He had some questions about what he should do with a couple of extra bucks he has kicking around.
His current RRSPs are invested for growth, so he's thinking that he should have some low risk investments to balance things out. He doesn't have a Tax Free Savings Account set up yet. That's nagging at him a bit; he'd like to get a TFSA established. He sees the local bank branch is advertising 2.25% interest for TFSA investments, which seems like a decent interest rate. So what should he do?
My response to him was, "Bottom line - it all depends on what you are looking to accomplish." And then we stopped talking about products, and started talking about what it was that he wanted to do.
See, here's the thing. I love TFSAs. They are a fantastic vehicle for both saving and for investment. And the 2.25% bank offering is probably a decent product, for what it does.
But none of those things are consistent with the client's objectives.
He's thinking about using this money for his retirement, and that's three decades from now. He has very high income, so he has the corresponding tax problem. He doesn't need liquidity, he doesn't need income. He has a long time frame and a decent tolerance for variability in his returns.
Rather than comparing products, what we did was look at what it is that my friend wanted to do. When you do that, it is clear that the fixed rate TFSA doesn't fit him at all.
He has options, and there are always distractions. But when we clarify his objectives, the appropriate decision becomes an easy one to make. You simply do the things that move you closer to where you want to be, and there is nothing about this particular TFSA option that helps this particular client meet his specific objectives.
What should you do with your money? It all depends on what you want to accomplish.
Don't ask, "What can I do?" Instead, ask, "What should I do to reach my objectives?"
The opinions expressed are those of Brad Brain, CFP, R.F.P. CLU, CH.F.C., FCSI. Brad Brain is a Senior Financial Advisor with Manulife Securities Incorporated, in Fort St John, BC. Manulife Securities Incorporated is a Member of the Canadian Investor Protection Fund. Brad Brain can be reached at [email protected] or www.bradbrainfinancial.com.
