When you live in Southern California, you learn to accept having to drive in congested traffic on one of our many freeways. And, if you are like me, it affords the solo driver lots of time to think. Last week, I was driving from Orange County to Santa Monica for a business related conference. As I made the driving trip, I began to recognize many parallels to planning for retirement – or any other investing goal for that matter.
First, I knew when I had to arrive – in this case at 8:00 am. This is the financial planning equivalent of determining at what age one wants to retire. A necessary part of any financial plan is to determine where you want to go, and when you want to arrive. My planned arrival time also had an impact on when I left that morning (5:45 am). I know from experience that to leave later, I risk arriving far later than I wanted to.
Next, as I was driving, the volume of traffic varied along the route. Sometimes the traffic was moving briskly, other times we were standing still. This could equate to periods of time when the market is moving up and down. Making course adjustments around unexpected traffic slowdowns, may improve one’s chances of arriving on time, as well.
I also observed the drivers around me. Many stayed in one lane rather consistently, moving with the general flow of traffic. There were others who weaved in and out of traffic, changing lanes constantly, but it didn’t seem to move them along more quickly. I typically stay in one lane until I approach my destination, then move over as my exit approaches. This parallels my philosophy on how my clients’ assets are invested, but we will save that for a future post.
By now, you have likely figured out the idea behind the post’s title. No matter how many times that I have driven to this location, I use the GPS feature on my phone to continually keep me posted on my progress to my destination. Without it, I wouldn’t know if there is an alternate to keep me on track for my arrival time. Imagine “driving” toward retirement, a route that you only get to travel once, and trying to get it right without directions? That is not an approach that is likely to have a high likelihood of success. A periodic report detailing your progress toward your goal will help prevent unpleasant surprises.
Who is your financial GPS?