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The Secret Is in the Swing, Not the Clubs!

November 19, 2013

I would like to tell you a story about my neighbor John. John’s an avid golfer and belongs to a couple of leagues. While John’s not good enough to play professionally, he does have enough moments where everything in his game comes together and triggers that little voice inside his head that says, “How good could I be?”

This is when John decides to make an appointment to see the local golf pro. When he arrives, the pro shakes his hand firmly and immediately proceeds to show him the latest in golf equipment. Clearly, John is impressed by the new technology. The clubs swing faster and the sweet spot is bigger. Suddenly, John’s old clubs are viewed with distain and resentment. As you can guess by now, John goes for it new “woods,” new irons, a putter, golf balls, and even a new bag. The pro ends up having a very profitable day.

Weeks later, the first outing of the season arrives and John is finally going to reveal his new game to some friends and potential clients. John steps up to the first tee and takes a few confident practice swings. His contact is sweet and the ball flies off the tee faster and farther than ever before. However, it then arches up and off to the right, deeper into the rough than he has ever been. Instead of playing the best round of his life, he is hoping he doesn’t run out of golf balls before he reaches the 18th hole. His buddies and former potential clients look away and John knows they are doing their best not to break into fits of laughter.

What happened to his perfect plan? The new clubs were not the solution, because the old clubs were not the problem. The problem was in his swing, which is the fundamental of the game. Until he fixes that fundamental, it really doesn’t matter which clubs he uses.

Just like golf, when it comes to successful financial management, the key isn’t in the financial products, it is in the mechanics. It’s how you’re financial products are working together holistically. This is more important than which bank, insurance company, or mutual fund you use. Now, before you get too far ahead. There are basic fundamentals that should be established:

Save 15% of what you earn.  

This is a fundamental principle. It’s the reason we constantly tell our clients to work toward saving at least 15% of their earnings. It sounds like a lot, but you can’t play the financial game without sufficient capital (or swing form). Maybe you can’t start at 15%, but if you ever want the chance to be financially independent when you retire, you will need to amass significant dollars. Of course the older you are when you begin saving the higher the percentage is that you will need to save.

Consider the costs.

Unfortunately, there aren’t any laws that say your retirement plan has to warn you about administrative charges or that a mutual fund has to highlight its annual expenses – that’s the purpose of the prospectus with it’s fine print. Some financial tools that appear very favorable can lose a lot of their luster when the real costs become apparent.

Get one dollar to do the work of many.

Many wealthy people have succeeded because they mastered this key fundamental. As an example, it’s why so many fortunes have been made through real estate. A leveraged dollar put into a mortgage can buy an appreciating asset, generate rental income, and create tax deductions. Think of this idea as a “utility club” in your bag.

Keep focused on the big picture.

In golf, the idea is to put the ball in the hole with the fewest strokes, not to just hit a great drive off the tee. For all the analysis and comparisons that can be generated, a financial plan is only is worth considering if it helps improve your life, your family and your community.

We all agree in the value of financial planning, but many people still need the motivation to help them stick to their game plan. That’s where Compass Financial Group fits in. Many advisors are brokers of investments and products, they sell “financial clubs.” Really, their primary objective should be to make the financial game easier by helping you use those “clubs”. At Compass Financial Group, we take a holistic approach and show you how to efficiently integrate your tools within your own customized plan.