When I was growing up, we used to play football in the field across the street from our house. At the start of the game, the offense would huddle up, and we’d design plays, ”You, run this pattern. You, run that pattern.” As the game went on, we’d get tired and start to run out of ideas, so the plays became, “Just go out.” Since the quarterback had no idea where his receivers were going, he would invariably throw the ball in the wrong direction. “Oh, I thought you were going to keep going,” or “I thought you were going to go left.”
I see the same thing with people’s financial plans. They transact with so many advisers and financial institutions over time, and none of them have any idea what the other ones are doing. Oftentimes, one part of the plan is working directly against another part. Case in point, I meet clients who have done a great job stuffing away money into their 401(k)’s. Then, I look at the statement and notice there’s a loan against the 401(k). Why is there a loan? Because when the opportunity came to buy a home or purchase an investment property, the only place they could go to get money was the 401(k). Now, they‘re being penalized to use their own money! Two parts of the plan are working against each other.
Coordinating strategies is an important part of planning. “Just go out,” is not an effective design.