Very few people are truly introspective. It is very difficult—if not impossible—to have a truly objective view of yourself. If we could, there would be no reason for psychologists, therapists, or clergy, for that matter. Financial issues are no different. Without perspective, one cannot even know if they are simple.
Let’s review the “simplest of simple” types of people. A young person, right out of college, and—to make this hypothetical person even simpler—they have no college debt. This person might say they do not need a financial advisor. No spouse, no kids, no real debt. However, there are many questions they need to answer if they want to lead a maximally fulfilled life. When do you want to retire? Do you want to have a family? Are your parents living, if so, will you be called upon to help them later in life? Do you want to own your own home? Do you want to go on at least one vacation per year? Do you have the best possible job right now and is it paying you what you need, or better yet, deserve?
For each of the above six questions, there are a whole lot of potential answers that will each require different actions to take to get you financially in the right place to address them. An advisor can answer these questions—can you? Do you want to run the risk that you will get the answers correct? In reality, simple never exists.
You Don’t Know What You Don’t Know
To further answer the simple question, you must ask yourself another series of questions. Almost all of us do not even know what questions to ask...we literally do not know what we are ignorant of. As a twenty-something, how many have asked themselves about their family health history as it relates to personal finance? Not many, but it’s a smart question to ask, as locking in low cost disability or life insurance while young and very healthy is one of many very smart things to think about before truly significant responsibilities come to you.
For your most recent job offer, did the employer offer a matching 401(k)? If so, did you calculate the dollar value over five years of that match and compare it to another job offer to see the literal dollar value of the retirement benefit? These are things that are not intuitive to consider, and when one thinks they have a straightforward circumstance, a financial professional will bring up questions that you never would have thought of yourself.
Do You Have Dreams and Goals?
For argument’s sake, let’s pretend that today you are indeed very simple from a financial and wealth perspective. Do you have ambitions for the next five or 10 years? Do you have visions of accomplishing something that you feel is out of touch, but would love to attempt it? Many people do, and the reality is that money and wealth impact your ability to achieve those dreams and goals.
For a personal example, in the early 1980s while in college, there was a year where I dropped down to just one class to focus on an invention I conceived. To pay for college, I did carpentry work at night and on the weekends. There was one particular task that was time consuming but needed a helper to complete. Given that I was self-employed, my preference was to not pay for a laborer to help with this task that I would be regularly doing. I invented a device to make the procedure not only easier, but a one-man job. I began researching the industry more and came to the conclusion that I could make and sell a lot of these devices to contractors and do-it-yourselfers.
My next step was to hire a patent attorney while I made the prototype. After the patent attorney concluded the search and determined I could get a utility patent, he casually said to me, “I assume you have already secured $5 million or so to get this made in scale so the big guys don’t copy and put you out of business within two years, correct?” I was very young, and clearly was not thinking ahead enough, and I said, uh, no. He suggested I save my money, not proceed with the patent and wait till I had resources. This was at a time just before patent laws got stronger and large firms could easily crush a new company by changing one tiny feature and undercutting the price by 10 percent and take the new company’s share.