Making Better Financial Decisions Through Visualization


By H. Adam Holt, CFPⓇ, ChFCⓇ

There’s no question that one of the most important aspects of smart financial decision-making is being intentional rather than haphazard. Having a strategic approach to finances is vastly beneficial for people in all stages of life and wealth, but especially those who are approaching retirement or have already retired.

Unfortunately, this can be a great challenge because most of what we put into our financial lives is haphazard, in the disguise of being intentional. Take, for instance, your first job where your employer provided a benefit plan, a retirement plan and some insurance and you likely checked all those boxes. Or when your cousin entered the financial services industry and sold you an annuity, or a friend from the neighborhood sold you a life insurance plan. Or even the investment advisor who worked with your dad, who’s relationship you inherited. Each of these examples are relatable in some way to how we accumulate our financial holdings.

Throughout your life, you’ve picked up financial holdings from different sources and while it seemed deliberate and intentional at the time. In reality, many of these legacy decisions go undermanaged or even ignored - creating confusion and clutter in your financial life.

Creating Your Visual

I often use a blueprint analogy to describe financial visualization to my clients. If you are looking to renovate all or part of your house, it’s crucial to organize your ideas and make sure everything will work together. You have to ensure that opening the closet door won’t block the entrance to the bathroom. But how do you know what it will look like and what steps to take in order to achieve your goal? By creating a blueprint.

Builders and contractors put pen to paper to map out a precise plan for how a successful renovation will happen. Blueprints are extremely effective in not only allowing people to see the bigger picture, but also the potential flaws. You wouldn’t break ground on your house renovation without a plan of action or something to reference. So, why do we do that with our finances? 

If you are able to build a visual of all of your financial holdings, you can be honest with yourself, identify the facets that are intentional and reevaluate those that are haphazard. How can you start building this visual? It’s easy — grab a piece of paper and across the top of the page, write the names of those who are financially dependent on you (or you are dependent upon). This is your financial household. Now draw a stick figure of yourself in the center, also including your significant other, if applicable. 

There is a lot of information we can write down about our finances, but there are few details that matter more than most. When you think of any financial instrument, tend to restrict your notes to the following facts: What is it? Where is it? What is it worth? Who owns/controls it? For example, John’s 401(k), at Vanguard for $50,000

Start first with income sources. Begin by writing down and circling each of the income sources coming to you, by starting in the upper corners and working down. List all of the sources you can remember, such as your salary, Social Security, pension and dividends. If you have a significant other at the center of the page, do this for them as well. After all your income sources are listed, total them up. Now, you have an idea of the amount of money coming into your household now or in the future.

Now continue to list all of your assets (under incomes), to the east and west sides of your visualization. At the bottom of these columns, include your personal debts, or liabilities, owed by each individual. In the south area, create boxes for assets and liabilities that you and your significant other share. We call these joint assets and liabilities because they include your house and mortgage, as well as shared banking accounts. 

Lastly, in the north, create boxes for all the different insurance protections you carry. Examples would be life, disability, medical and long-term care policies that protect you and your family. 

Being Honest With Yourself

You have just created a version of an Asset-Map -- a visual representation of your household’s financial inventory. Once you have completed it, you have access to the most valuable part of this process: your own honesty. When we see the full picture of our financial lives, we recognize what is intentional and what is haphazard. This visualization forces us to answer questions like, “Will this current financial inventory serve and sustain me through retirement?” In turn, these questions will spark crucial conversations. 

Sit down with your significant other and the people who are an intimate part of your financial well-being and try to answer these questions. However, you might feel you don’t have enough information or knowledge of the financial world to make an accurate assessment. If that is the case, it could make sense to begin a conversation with a professional advisor. 

There are plenty of instances when an outside perspective is beneficial. Most of us who have ever had a medical issue probably knew the cause of the problem, but needed confirmation and direction from a doctor because they have expertise that we don’t. The same logic can be applied to a financial advisor. 

A trusted advisor will look at your visual and assess your financial situation. They can work with you to put together a plan to fix the problems, fill the gaps and bring a high level of expertise to the table. For example, I’ve noticed that many clients in the baby boomer generation have randomly placed accounts, such as 401(k) plans from previous employers, that haven’t been optimized or adjusted in many years. A financial advisor will see this clutter and help you consolidate it. Think of all the toys strewn about in a child's messy room — you notice the clutter and know how to fix it while the children usually don’t even see a problem!

Financial advisors will also recognize and fill the significant gaps in your visual. They should make sure you have certain income sources in retirement, relevant legal documents and long-term-care solutions, all of which are critical to your financial well-being.

The world of finance can be extremely complex and difficult to navigate, especially if you are retired or approaching retirement. Holistically visualizing your finances on paper creates a unique clarity and allows you to be honest about your needs. Having an honest conversation with yourself, those in your household and a trusted financial advisor will help you make better financial decisions. 

H. Adam Holt, CFPⓇ, ChFCⓇ, is the Founder and Chief Executive Officer of Asset-Map, LLC. Holt has been a financial advisor for over 20 years, during which time he has helped build and manage his wealth management firm to over $1 billion in assets under management. Asset-Map is a financial technology firm dedicated to creating engaging visual communication tools used throughout the customer and advisor journey and is used by thousands of advisors worldwide.

Perry Feinstein