The My Next Phase Newsletter - Volume 12 | |||
Rebalancing Your Personal Portfolio
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Booms and busts, bulls and bears. Bubbles, bursts and recoveries. (Anyone got a "b"-word for "recovery?") Call them what you like. For better and worse, we can't escape them. What else is for sure, when nothing seems to be? When things head south, financial experts wisely suggest we take time out and rebalance our portfolios. Advisors say a down market is the ideal time to take a fresh look at investing goals, and perhaps redo our asset mix to account for new thinking, or changed life circumstances. Also, to get in touch with our true risk tolerance, and what kind of market stress we are fundamentally built to endure. Down market or up, there really is no bad time to rebalance. And while you're rebalancing, we urge you to examine your personal portfolio as well. We further - and, strongly -- encourage you to do the personal work before diving into the financial details. What, and Why Your personal portfolio consists of the goals and activities you've realized have power to give you fulfillment. If you completed the My Next Phase process, your portfolio is clearly laid out as the activity choices in your non-financial retirement plan. You want to look anew at - or, maybe identify for the first time - your personal portfolio before refreshing your financial portfolio, because better retirements happen when your money supports what makes you fundamentally happy. Otherwise, it's like gassing up and pointing your car in a direction you hope leads someplace nice. Money is the fuel, not the destination. |
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During non-boom times, that becomes ever more apparent. It's well documented how people discover, or rediscover, their spirituality when they feel less financially secure. Our thoughts naturally turn to what we value most, and to reevaluate what we're doing with our lives. We start changing the way we keep score. Taking Your Introspection Further Ratcheting up that healthy introspection up a notch, in a directed way, can make your personal portfolio's assets work harder for your retirement. Step one is getting in touch with the side of your personality that governs how you experience fulfillment, and deal with stress. If you're outgoing by nature, you probably are happier doing things in groups, instead of solo, or perhaps just with your spouse or partner. Practically speaking for retirement planning, that may mean joining a tour group for that long-awaited retirement trip to the Far East - and about anywhere else you may travel after work ends. You'll also want to get frank with yourself about how you deal with stress. In My Next Phase parlance, that's your stress style. If your stress style is responsive, things tend to look worse than they are when you're feeling pressure. Simply knowing your tendencies can help you recognize such feelings upon arrival, and remind you to take that deep breath. If, on other hand, your stress style is resilient, you generally can tolerate more stress. But in doing so, you may often overlook the legitimate risks that that underpin and create feelings of duress, and that signal you to take necessary action. Resilient types are best advised to put the brakes on from time to time, and evaluate past decisions in light of current circumstances. This part of our process is called Understanding Yourself. If you've completed it - especially if it's been a while - now may be a good time to take a fresh look at your personality report, and get back in touch with some fundamental insights key to maintaining and growing your personal portfolio. Reflecting, Changing, Replacing Your personal portfolio's assets, just like its financial counterpart's, can't run in place amidst shifting conditions. On the personal side, as it relates to retirement planning, that starts by considering what in your life stands to change when you enter this new life stage. Start with your most important relationships. First, think about what in your home life may change when you start spending more time there? (Hint: more than you probably think.) Think even harder if your spouse or partner already spends the majority of his or her time at home. Know that you'll be invading what's been their exclusive, daytime domain, save mostly for weekends. Consider your social networks, which will grow more vital for you in retirement. Most people have two: that which work provides, and carefully cultivated friends and neighbors. Realize that your work network will greatly ebb when you retire. While only natural, many find it a rocky adjustment. It makes your friends and neighbors network all the more important. Where other than the office will you now go, as Cheers tunefully celebrated, "where everyone knows your name?" Does moving far away to a retirement community (even part-time) hold the same appeal it did 10 or 15 years ago, when retirement was more abstract concept than looming reality? If you easily make new friends, maybe it's still a good plan. But if not, consider if a few extra months of pleasant weather are worth the trade. And what if grandchildren who live nearby have since entered your life, whose company you cherish more than you'd ever have dreamed? These change-oriented issues are addressed in My Next Phase's Balancing Your Life module. Take a look back at your Life Change Inventory if you're a graduate, and see which of the changes you predicted came to pass, and consider what else has changed that may call for course correction. Getting Down to Specifics; Allocating Your Personal Assets Next, harness the power of your new or refreshed insights to make wise portfolio choices. In your financial life, this is where you'd select new assets and other financial vehicles, considering freshly amended objectives and strategies. It's where the actual rebalancing occurs. In your personal portfolio, it's the time to identify or revise the specific goals that can give you purpose in retirement. Then, to zero-in on specific activities that can help you achieve them. You're making tangible choices here, just like selecting a stock, a bond fund or mutual fund. And you'll be wise to diversify. Too much of one good thing (be it golf, volunteering, babysitting the grandkids...you name it) often turns toxic. On the other side, don't slice the pie too thin. An overly ambitious list too easily produces stress and disorientation. But do start with a big list. Then pare down to a single-digit list of choices with the best potential to fulfill you in retirement. You'll want to screen for feasibility (knocking out good but unrealistic, undoable ideas), and to make sure your final mix delivers key elements of a successful retirement: intellectual challenge, physical activity and social connection chief among them. Take it further: how, exactly, will you pursue your chosen activities? For example, volunteering is a popular choice. But what form will yours take? You'll want to revisit some key personality insights here. For example, if you're more of a "go it alone" type, think about joining a smaller organization, or perhaps one that enables you to work more independently. If your financial situation requires you to supplement your income at least part way into retirement, how else can you deploy your skills? No longer requiring your entire paycheck can free you up to refashion your work role into something more satisfying to you, and more beneficial to a current or future employer. You'll still feel a genuine sense of freedom and freshness, even if work wasn't tops on your original retirement to-do list. The planning templates in our final step, called Redefining Your Role, help you drill down to this level of detail. The end result is your personal portfolio: your non-financial retirement plan. Ideally, a diversified, balanced portfolio geared to pay dividends in the form of sustained fulfillment throughout retirement. And, that provides the framework for revisiting your financial plan. We've always strongly encouraged our clients to test drive and periodically revisit their non-financial plans. There may be no better time than now. To forward to a friend, please click here. To send a message or question to the My Next Phase team, please click here. To learn more about membership, please click here. Copyright ©2008 My Next Phase. All Rights Reserved | |||
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