Published On: August 10, 2021

Written by: Ben Atwater and Matt Malick

Our last essay was about coaching clients toward successful behaviors.

To get the conversation started we used Wikipedia’s definition of coaching: “Coaching is a form of development in which an experienced person, called a coach, supports a learner or client in achieving a specific personal or professional goal by providing training and guidance.” 

Today, we are going to further explore this area by focusing on the goal part of the definition.

Here is how Wikipedia defines goals: “A goal is an idea of the future or desired result that a person or a group of people envision, plan and commit to achieve.”

Here are a few examples of common client goals and some brief thoughts on each:

Have ample savings for retirement “income”

In this area, a lot of clients are looking for a number or an amount they need to accumulate in savings to support their lifestyle in retirement.  Depending on a lot of different circumstances, your investments should be able to provide you with a 3% to a 5% total return payout over full market cycles.

This means if you need $100,000 to supplement your other retirement income (Social Security, pensions, deferred compensation, business income, etc.), then you’ll need $2 million to $3.33 million in savings.

What is your “magic number” and how are you working toward it?

Have and follow a budget

In a related sense, say you are more frugal than the above example and you figure you will only need $50,000 in portfolio income to supplement your retirement. Well, in that case, you obviously cut the numbers above in half – to $1 million to $1.66 million, respectively.

Do you have a budget and, if so, how deliberate are you about it? And why do you have a budget? To reach your savings goal sooner and retire earlier?

Regardless, thinking through this kind of give and take scenario – for example, the less you spend, the less you need to retire – is an important part of the goal-setting process.

Save more

Mass affluent families should be maximizing their retirement plan contributions. That, in and of itself, is an important and attainable goal.

However, families should be pushing to do more. Saving in a brokerage account or investing funds in other ways is vital. Pay yourself first and let your money work for you – two invaluable cliches.

To save more, you have to spend less, but by setting aside money systematically (just like you do in your retirement accounts) you will make the pain of saving less noticeable.

How much more can you start saving today?

Have a second home

If a second home is an absolute goal of yours, there are different ways to approach it.

If your savings is so substantial that you can write a check for your dream home without impacting your retirement plan whatsoever, that is clearly the easiest route.

But, that doesn’t apply to most mass affluent people. Another path is to finance a home with a mortgage and be sure that your payments and your various expenses fit into your budget. If all goes well, the property will appreciate over time leaving you no worse off and having greatly enjoyed the second home.

A third way is to buy a second home that generates revenue (rent) that covers all or most of the home’s expenses and that builds future equity until such time as you can enjoy the home without having to rent it.  In our experience, rental properties commonly cause more headaches and generate lower returns than investors anticipate.

For this goal, clients have usually already made up their minds as to whether this is something they want. However, how you get there, how much you will enjoy it and how it will limit your other opportunities and goals are all worth thinking about.

Have an appropriate and equitable estate plan

All things being equal, the more liquid your estate plan is, the easier it is to carry out your wishes with little effort. However, having family businesses, multiple family homes, special needs spouses or children, spendthrift spouses or children, etc. can complicate things quickly.

To create the best plan possible, first outline what you want to accomplish. Believe it or not, that’s the easy part.

The hard part is having open and honest conversations with your family and your advisors. People do not want to discuss death and therefore avoid it. The opposite approach though is most effective. Open up and bring everyone to the table.

One last piece of general advice as we close this essay on goals…

Do not let others influence your goal-making. All too often we are motived to keep up or demoralized because we cannot keep up. This is wrong thinking. Your goals should be unique to you, and you should take pride in your incremental improvement regardless of what the next person is doing.

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