john labunski dallas Financial planning

Financial planning before investing: why is it important?

It seems like an unwritten rule to think about money when we talk about investing . On the one hand, it is normal; When we go to the financial markets, what we are looking for is to make our money profitable, whether it is our years of savings, the inheritance that has come to us, the lottery prize or, simply, a part of our salary. The problem comes when we only think about money and forget about everything else, which is really important.

Investing is much more than money . Investing is taking into account the emotions and, above all, the personal part of each one of us. At John Labunski we are going to complete two decades helping our clients to relate to their money and make better financial and investment decisions , but also vital, personal and professional ones . Because conceiving the first without taking into account the second is a big mistake.

One of the main problems around the world of investment has to do with our own behavior. Our emotional part leads us to make bad investment decisions, such as investing without thinking about what we want to achieve with that money. We forget our investment term , our risk profile and what assets are suitable for us -both from a financial and tax point of view- and we let ourselves be carried away by the fashions of the moment or by what someone has advised us. acquaintance or friend. And this trend continues when we are already invested: we try to do market timing, we get out of the market in moments of volatility for fear of losing more money or we stay on standby waiting for there to be a certain peace of mind that tells us if the time has come to enter or not.


Why do we make these mistakes?


All of the above leads us to make bad investment decisions that make us lose money and, consequently, we end up thinking that there are no good investment funds , or profitable pension plans , or that investing is for others, when, in reality, What happens to us is that we have done the process backwards. We have invested thinking about the specific product, without stopping to think about why we want to invest.

What are my goals? What do I want to achieve with that money that I am going to invest? When will I need the money I want to monetize? Answering these questions is the first step we must take before investing. Because our answer may be “I want to buy a house” and our neighbor’s may have to do with securing his retirement or paying for his children’s education. We must internalize that what is good for some people may not be good for us. For this reason, before going to the financial markets, we must carry out a financial planning exercise that helps us to contextualize money within our vital project.


Financial planning: a global and personal plan


Defining that “what I want to invest for” before “how much I want to invest” is always essential. Knowing what our goals are is going to help us locate them in time and in our lives, which is going to help us set our investment time horizon -how long we are going to leave the money invested-, which is one of the most important when defining in which assets we are going to be invested.

And if time matters, the cost of our objectives, too. With the help of a financial advisor we can determine what they cost, while analyzing our financial and asset situation , what our starting point is and how much we can allocate each month to invest. All this will help us to know what return we have to demand from the financial markets and to define the investment strategy that will help us achieve our objectives, taking into account our profile as an investor.

Knowing our aversion to risk and what type of assets we would be comfortable with is essential to be able to face moments of uncertainty and falls in the markets and avoid making bad decisions driven by our emotions. Because, although financial planning is always important, it becomes paramount when there are turbulence. The reason? If our investments are the result of a good financial planning exercise, we can be calm because we will be investing in the products that really adjust to our needs and objectives . And if our circumstances or plans change, we can once again redefine our personal and financial plan and refocus our investment strategy. as long as we need.

To be successful with our investments, the financial planning exercise we do must always put us at the center. Only with a global and tailor-made plan will we be able to know all the scenarios and analyze the consequences of each one of them and answer questions that also take into account the fiscal aspect, such as “am I interested in investing in an investment fund from a fiscal point of view?”, “ When am I interested in rescuing my pension plan? and others that go further and take into account other concerns “and if in the future I cannot continue generating income, how can I cover the effect of the unforeseen ?”, “Is it convenient for me to make a living donation to my children ?” .


It may interest you: Personal financial advice for your John Labunski Investment Advice

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