Solving the Puzzle of Your Financial Picture

I’m not sure if this is a cultural phenomenon or just how we are wired as humans, but I see so many people agonize and dwell on the minors while ignoring the majors.

You can’t stop thinking about that nick on your new car, your teenage daughter can’t stop looking at that pimple in the mirror, your husband can’t stop complaining about that slightly crooked outlet in your home.

We tend to obsess over the small (the minor) while failing to focus or even recognize the whole (the major).

We even have an idiom in the English language to express this: missing the forest for the trees.

And we bring this very paradigm to our finances. I see it all the time. Investors get tunnel vision on an investment or a planning item that has very little impact on their whole portfolio or plan. The energy, the emotions, and the time that gets committed to these obsessions are never commensurate with the attribution or impact.

Yet, don’t get me wrong, I am a believer that a collection of small tweaks and improvements can add up to make a meaningful impact. James Clear dedicated an entire book – a New York Bestseller, I might mention – to this very topic, Atomic Habits.

So, how do I, as an advisor, solve for this tension? Knowing that each incremental decision is indeed important but helping my clients not to elevate every decision as if it was the most important. Like most personal finance riddles, much can be solved by reframing. How we see our money and how we visually approach our planning matters.

Puzzle pieces.

That’s how I see financial planning and investment management, just like a puzzle. Each piece on its own is relatively insignificant, but each piece finds its significance within the whole. A puzzle that’s missing even one piece is incomplete. Some financial decisions carry more weight and priority, just as a puzzle builder will often start with the corner pieces to begin their building process.

I’m sure some of you might be thinking this concept feels too philosophical, or you’re a bit lost for the practical application here. I’ll ask for your trust and patience – let me develop this idea a bit further. I’ve seen financial distraction cause so much harm, and I’ve seen bad investor behavior derail clients from their objectives.

So, let’s dive into an application. In personal finance, the completed puzzle is your balance sheet and your financial plan. The personal balance sheet is an extremely underrated tool in personal finance. When was the last time you updated your personal balance sheet? Furthermore, are you filtering your investment decisions (puzzle pieces) based on the whole picture of your balance sheet?

The specifics here will depend on YOUR balance sheet and YOUR financial plan. Some of you own your home with no mortgage, and that reality may very well impact how your investment portfolio should be allocated. Some of you have a balance sheet that is heavily concentrated in the ownership of your private business, which should influence how you think about risk management and insurance. Some of you have multiple advisors managing different pieces of your portfolio, or you’ve elected to DIY with some portion. These realities need to be viewed in consideration of how all these parts fit together.

So, if you’ve allowed an underwhelming minor allocation to emerging markets to keep you up at night or if you’ve dedicated countless hours to trying to  understand how to make minor backdoor Roth contributions, but you’ve neglected some of the major planning items around risk management and high-level asset allocation then I encourage you to heed my advice.

Each decision and each contemplation should be viewed as a single puzzle piece, with the primary thought of how this piece fits into the whole picture.

Your financial puzzle is unique. The combination of your objectives, your balance sheet, your preferences, and your aspirations make it impossible for you to take blanket advice. The guidance and advice you receive needs to be unique to… you.

In that same vein, you need truth. If you are obsessing or anguishing over the minor, you need the wise counsel that pimples aren’t permanent. You can’t let minor blemishes and your own pet financial hang-ups devour your time and emotions.  Investing and financial planning are already hard enough. No need to pile on.

So, where do we conclude?  A common finish line for many of my Thoughts On Money – this topic deserves further dialogue.  You and your dedicated advice giver need to discuss your financial puzzle and start by identifying those “corner pieces” that deserve your immediate attention.

As always, I hope this helps…

P.S.  I’d encourage you to join us for the Podcast, where we unpack these articles a bit further in an easy-to-listen-to (hopefully enjoyable) conversation.

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About the Author

Trevor Cummings

Private Wealth Advisor, Partner

Trevor is a Partner and Director of our Private Wealth Advisor Group.

As the author of TOM [Thoughts On Money], Trevor endeavors to write and speak about financial concepts and principles in a kind of “straight” talk demeanor and posture.

He received his Bachelor’s degree in Organizational Leadership from Biola University and his MBA from California State University, Fullerton.