Human nature does us no favors in our efforts to achieve our long-term financial goals. We are, by nature, susceptible to the lure of immediate gratification. We are seduced by shortcuts. And we are vulnerable to emotions that persuade us to buy when we should sell, and sell when we should buy.
Unfortunately, all of these perfectly normal human tendencies contribute directly to the procrastination and poor decision making that too often undermine our pursuit of financial security. Our own First Command Financial Behaviors Index® finds that just one in five middle-class Americans feel confident in their ability to retire comfortably.
My sense is that most First Command clients are more confident and better prepared than the general public simply by virtue of the fact that they have a financial plan and access to a Financial Advisor. The First Command Financial Behaviors Index® continues to reveal that families with a financial plan delivered through a personal Financial Advisor are significantly more confident in their financial decision-making and more optimistic about their financial future than those without a plan.
But don’t get me wrong. We’re not wasting a lot of time patting ourselves on our backs. There are still far too many First Command clients who, though they may be doing better than the rather woeful national averages, are not on track to reach their goals. And we must do a better job of fulfilling the commitment we’ve made to them.
Though we continue to believe that the best first step toward combating those destructive tendencies I’ve outlined is to set meaningful goals and implement a financial plan for achieving those goals, it must be conceded that a financial plan by itself, no matter how expertly crafted, offers no assurance of reaching one’s goals. It’s not, in other words, your financial plan that matters most, but how you execute your plan.
So the challenge we face is how we can help clients who are not on track for their goals better execute their financial plans. And an increasing body of evidence suggests that the best way to do that is to continually reinforce smart, productive financial behaviors. Like living on less than you make and paying yourself first. Maintaining an adequate emergency savings account so that you’re not forced to tap your long-term investments to meet unexpected, short-term needs. Paying off your credit card balance every month so that debt service does not become a fixed component of your budget. Understanding that declines in the stock market are buying opportunities. And meeting regularly with your Advisor to ensure that you are on track and that your financial plan still accurately reflects your circumstances and your goals.
I know what you’re thinking. This sounds pretty elementary, doesn’t it? I couldn’t agree more. But the problem is that too many people are eschewing these proven, fundamental behaviors in their search for…yes, shortcuts to financial security. It’s like a football team deciding that blocking and tackling are boring and old fashioned and trying to win games with a bunch of trick plays. It sounds exciting. It just doesn’t work.
I mentioned in my last commentary that we are investing significant time and resources in preparing our Advisors to serve as effective financial coaches to their clients. Perhaps you now better understand why we believe this approach makes so much sense. We’re convinced that the biggest obstacle to financial security for most people is their own behavior – and that the best way we can help them overcome that challenge is through a coaching relationship that allows our Advisors to continually reinforce smart financial behaviors. Because smart financial behaviors, reinforced often-enough, eventually become something even more enduring – smart financial habits.
First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through knowledgeable advice and coaching of the financial behaviors conducive to success, First Command Financial Advisors have built trustworthy, lasting relationships with hundreds of thousands of client families since 1958. Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index® assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. www.firstcommand.com/research Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. SDS is a behavioral science and consumer psychology consulting firm with special vertical expertise within the financial services industry. SDS specializes in advanced research methods and statistical analysis of behavioral and attitudinal data. First Command Financial Services, Inc., is the parent of First Command Financial Planning, Inc. (Member SIPC, FINRA), First Command Insurance Services, Inc. and First Command Bank. Financial planning services and investment products, including securities, are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Insurance Services, Inc. in all states except Montana, where as required by law, insurance products and services are offered by First Command Financial Services, Inc. (a separate Montana domestic corporation). Banking products and services are offered by First Command Bank. Securities products are not FDIC insured, have no bank guarantee and may lose value. A financial plan, by itself, cannot assure that retirement or other financial goals will be met. In Europe, investment and insurance products and services are offered through First Command Europe Limited. First Command Europe Limited is a wholly owned subsidiary of First Command Financial Services, Inc. and is authorised and regulated by the Financial Services Authority. Certain products and services offered in the United States may not be available through First Command Europe Limited.