Are You Throwing Money At The Wall Hoping Something Sticks?

One of my most challenging conversations is with someone who has spent decades not knowing what to do with their money.

I speak with doctors, dentists, and medical professionals several decades into their careers who have worked hard, provided excellent service, and created a comfortable lifestyle for their families.

Yet, in their 50s or early 60s, they reach out almost apologetically, stating they haven’t managed their money well, frightened of what the future holds.

The other day, I spoke to a doctor and his wife who make a combined income in the high six figures. This doctor hasn’t lived an outrageous lifestyle of the wealthy.

But without a viable plan with focused implementation and compounding the right assets, they are continually uncertain of their future, and rightfully so.

They had what I call a “spaghetti on the wall” plan. It’s what many people bring to the table today. 

Think of a classic all-out high school food fight. Spaghetti hits the wall. Some of it sticks. Most of it slides to the floor. 

Many take the same approach to investing, they throw investments at the wall to see what sticks. I call it “spaghetti on the wall” investing. Many follow this strategy, though they call it by a different name. Financial advisors certainly wouldn't be a fan of this title.

Incentives and Financial Advisors

Doctors often work with multiple financial advisors over the years to find the best advice they can. That’s not bad, as long as you understand the incentives of anyone who sells products, services, or their time.

Financial advisors are incentivized to “sell” or advise you on what they have in their toolkit. Their tool kit, however, may or may not fit your financial goals. Incentives are one of the ways you can discern if an advisor (anyone who advises you on anything) truly has your best interests at heart.

Do their incentives align with your goals? Here’s an example: Do they make money when you do? OR do they make money regardless of the performance of your investments? 

If the answer is yes to the latter question, it leaves room for disinterest from an advisor and is not a financial relationship I would enter.

Do they have a financial interest (commission-based) in steering you toward particular investments? How broad or extensive is their financial knowledge beyond the specific products they are selling you? 

Do You Know the Purpose and Performance of Your Investments?

Many show up later in life with a smattering of spaghetti on the wall of investments, with not a clue of what the investments were intended to do or are doing now.

They believe that by the time they are in their 50s, 60s, or at least approaching 70, they should have this excellent investment portfolio of accumulated assets. But they don’t. I hear this almost weekly from business owners and doctors.

Their portfolio is all over the place with no rhyme or reason. There is no design or purpose for their capital investments.

The logic is to store capital until you can tally it all up at the “end” and figure out how long it should last. This should not be done near the end of your career.

Most financial advisors will give generalized advice and not dig deeper into the specifics as to why a particular investment will generate a return (profit) and how that return impacts the goals you want to achieve. 

Do You Place All of Your Trust and Money in Your Financial Advisor?

Do financial advisors ever dig into what happens if things don’t go as planned? They always say, “If everything goes according to plan, then it should work out for you.” Has anything in your life ever gone according to plan?

What are the contingencies? What are the safeguards? What are the alternatives? Those are the questions I’d start asking.

Like most people, financial advisors need to catch up on their inflation predictions. Many thought inflation was going to be transitory. Therefore, financial advisors will use the average of the last 40 years of inflation (1.75% per year) in their calculations.

Even though the rate is higher today, they argue that inflation must come back down.

I believe Inflation will not come back down. Too many factors indicate otherwise, and I think you know that as well.

Not only do we have to invest in a volatile marketplace today, but we also have to combat the rising cost of living.

The cost of living will continue to rise because there is no way this government can continue to accrue massive debt and deficit spending without monetizing the debt, which is another word for inflation.

So, if a financial advisor is so confident that inflation (a significant factor in retirement calculations) will stick to the 40-year average of 1.75%, they are missing some obvious signals in the economy. I personally would not take advice from them.

How Do We Solve This Common Issue?

If you are approaching the end of your active income with a smattering of investments on the wall just to realize what you have is not enough, you are not alone. There is a solution.

This is the plight most hardworking people face today. They didn’t do anything egregiously wrong. They just never had a viable financial plan they could implement.

A viable financial plan requires measurable milestones along the way to your desired goal. It should be a requirement to check in on your progress every year. To check your progress when you’re 35, 40, 45, etc.

Are you accumulating assets that produce predictable, sustainable income? Is that income coming in every month, quarterly, or yearly? Can you see tangible results from your investments? Are you advancing your desired goals every month or year? If not, then what do you need to change to create progress?

If you have those measurements in place as you go along your career path, you will build wealth. Measurable milestones are how younger generations can start to build wealth today.

You can still play in the periphery (with a pre-decided-upon amount of money) and have moon shots in crypto, tech stocks, and whatever else. That’s fine.

But your core, your base investments must be constructed on a viable plan that can carry you through the ups and downs of the marketplace. If you don’t have a viable financial plan, that is where you need to start.

Beware Financial Advisors Who Lack Experience

Unfortunately, as much as they do their best, the vast majority of financial advisors have not been through a complete market cycle. They do not have the qualifying experience to advise others on making investments in this new era of investing.

Many of them only started their careers after the 2008 Great Financial Crisis. Even less have been around since the 1980s or 70s when stagflation and interest rates were high.

Most financial advisors lack experience and think only in terms of short blocks of time. No malice is present. It's just all they know.

If you desire to grow wealth and freedom for the rest of your life and pass it on to your kids and grandkids, you must start taking more financial responsibility.

If you want to pass on more than just wealth, you must start doing things differently.

That’s what I love to do in Freedom Founders. We don't sell investments. We don't have any back-pocket deals or take commissions on your investments.

We are a membership-based community. This means my incentives focus solely on what is best for the community. I don't have to make money off of your money. I despise that personally. I won't do it.

Questions to Clarify Your Next Steps

Think about who is advising you and where you're getting advice from. Do your advisors’ incentives align with your goals? Do they have sufficient experience in the area you want to invest in?

What may be missing from your freedom plan? Do you need to include measurable milestones? Do you need clarity on your goals? Do you need more viable options?

If you are hardworking and have done the best you can, but you're just not sure if you have enough… the time is now.