If we were to compare ones “wealth vehicle” to that of a car, ask yourself the following:
- Do you own a car?
- Do you service the car yourself and/or have it serviced at least annually?
- Do you maintain the car yourself (wash, vacuum, etc) minimum monthly?
- To what level is your car insured?
- What are the expectations of your car? (safety, efficiency, comfort, robustness)
- How have you purchased you car? (loan, lease, fully owned)
- Have you taken additional driver training courses?
Both our vehicles our “car” and our “finances” require money, time and skill.
Regular maintenance, insurance and driver skill/responsibility of our car ensures greater peace of mind, feeling of greater safety and control. While lax maintenance, inadequate insurance, lacking skills and responsibly directly increase risks and catastrophic consequences.
It’s the same when it comes to our finances, forcing us to make one of three choices. Either
- Trust in our own skill, knowledge and experience, self insure and do the work ourselves.
- Be responsible do the basic work but delegate specifics to specialists i.e. insurance, mechanic
- Delegate 100% the job to some you can trust i.e. their profession and legal duty to do the work for you.
Important as maintenance and service is for our vehicles (cars and finances) and regardless of doing it all ourselves or not the facts are that over 90% cause of accidents and injuries on the roads is due to driver decisions. Within this 90%; 45% involve drug/alcohol, 20% weather related, 35% driver error.
One may argue this percentage also extends to financial accidents, i.e. the 90% of financial losses being investor decision; within this 90%; 45% investor invincibility (enhanced performance expectations vs. actual abilities) AKA “excessive borrowing with limited or nil cash flow”, 20% changing economic, legislative or market movements and 35% poor decision making; albeit there are no official statistical data confirming or denying the accuracy of these percentages.
So be it utilizing our car or our finances as vehicles for convenience, a destination and/or improve our quality of life, there is always additional risk to be factored in. The biggest risk to our “desired destination” I suspect is by far is ourselves.
Just as the role of a good mechanic is to sign off our vehicle is responsive, legal and road safe after their service, your adviser’s role to sign off our finances are safe from disaster, legal, flexible and align to your lifestyle needs. These actions in themselves do not guarantee we will reach our destination, however they do increase the probability of reaching our destination with greater certainty.
As we head into the Christmas Season and I join the many of us on the road, for other families and my own sake please drive responsibly, don’t over extend yourself, or think you are invincible, ensure your car has been serviced and is road worthy.
And here’s a tip try, the same approach to your finances. You may just find that by doing so your journey more enjoyable and you’ll reach your destination with more energy, all leading to an even better holiday for you and those important to you.
Merry Christmas and be safe if you are on the roads.
Peter Horsfield founder of SMARTadvice has provided tailored solutions to individuals from 1998.
He has been a Certified Financial Planner since 2003.
Peter was recognized 2007, 2008 and 2010 as National Advisory Practice of the Year in Australia.