Sorry for the extended break between posts. Vacation’s over now so we’re ready for Part 3: The Number Crush

Sometimes numbers are so big that they stop having any real meaning to individuals. The budget deficit here in the US is a good example. Some time in the past year US deficit spending went from the Billions to over a Trillion, while the actual debt is over 13 trillion. Once you get past nine zeros most people just see “big number”. Really, from an individual perspective what’s the difference between millions, billions, and trillions? (Note: if you are not sure, consider running for congress.)

So when we start looking at the kinds of numbers it takes to have a secure retirement it can be overwhelming. Worse yet are advisors (myself included) who tend to throw in inflation, interest rates, guarantees, insurance, alpha, beta, risk, return, and a ridiculous number of factors when trying to introduce a plan. We are full of opinions that contradict what the other advisor said (or ourselves). It is all overwhelming and confusing. Most financial issues have significant complexities. A favorite quote of mine from H.L Mencken is, “For every complex problem there is an answer that is clear, simple, and wrong”.

The unfortunate downside of the huge numbers, complexity, and contradictory information is that folks become overwhelmed and do nothing. All the information creates sensory overload and we respond by hunkering down and freezing. However, the big rig of the future just keeps coming right at us and we better determine what we’re going to do and get moving or risk road-kill status.

So what to do? First is accepting that reality is complex. Yes, the number is big, but that doesn’t mean it is unattainable. Yes, there are a lot of moving parts to a financial plan, but they can be integrated. Know that you will need to dedicate some time to developing a good plan and be wary of those who promise a simple and clear answer to complex problems. Just keep moving.

While you are gathering data and developing a plan don’t lose sight of basics: strive to maintain a positive cash flow, saving is better than not saving, debt is not your friend, and set & pursue realistic goals.

Remember that big numbers are just a lot of smaller numbers put together. Even if the amount you can save today seems insignificant when compared to the target, every amount helps get you closer to success.

To address the complexity of planning you should seek out a planner. (That may seem a bit self-serving but hear me out.) Look for someone who focuses on planning and not product sales. A good planner will take the time to both understand your situation thoroughly and to help you understand how a suggested solution works. The National Association of Personal Financial Advisors has a great set of questions to ask a prospective advisor in the “Financial Advisor Diagnostic” at www.napfa.org/tips_tools/index.asp. That should help you find an advisor who meets your needs.

The most important thing to avoid is the tendency to do nothing. Just keep moving forward toward those long-term goals.

Jim Heitman, CPF Jim Heitman, CFP®, is a writer, speaker, Certified Financial Planning practitioner in Southern California, and the founder of Compass Financial Planning – a fee-only planning and money management firm.