When Making Major Financial Decisions, It Pays to Mind Your Qs – Presented by Mark K. Lund, Utah Financial Advisor

Financial Advisor UtahIt seems like all the pharmaceutical ads on TV (or wherever you stream your content) follow the same formula. They say a few words about an illness or condition, then they show ordinary people enjoying the kinds of wonderful activities that make us all jealous on social media: Driving a vintage convertible along the coast, riding bikes to a beautiful picnic spot, or enjoying a big family dinner in the front yard of a quaint farmhouse.

By law the pharmaceutical companies are required to mention the possible side effects to their drugs. These are listed by a soothing voiceover as you see the most stunning shots in the commercial.

Obviously, the drug marketers’ job is to emphasize the benefits of their product while drawing as little attention as possible to its potential downside. In other words, despite what the voiceover is saying, their visuals are designed to bias you in favor of their drug.

Fortunately, your physician does not prescribe medicine based on how a commercial makes him or her feel. Instead, they carefully consider the two Qs: the quantitative—how does the drug work and do diagnostics favor its use in your case? And the qualitative—how will this treatment affect the rest of your life?

Powerful drugs usually come with significant side-effects. There’s always a trade-off.

The same thing is true for major financial decisions. It’s important to look at both Qs—the quantitative and the qualitative.

Rob Myers, a financial planner and wealth manager, gives the example of a couple he helped with making a decision about how they should take their pension income.1 They had the option of receiving their money as a large lump sum or taking it as a monthly benefit guaranteed for the rest of their lives.

Myers began with a quantitative assessment, looking carefully at the pension’s survivorship options, and then running the numbers to determine how the lump sum would need to perform as an investment to match the monthly benefit. Based strictly on cash flow math, the guaranteed payout turned out to be the better option.

But then the couple needed to consider the second Q, the qualitative. They needed to answer more personal questions like “How much would having a large sum at your disposal mean to you?”

“Utilizing a goals-based approach and crunching the numbers,” said Myers, “allowed us to put the choices in front of them in an even-keeled way, eliminating any bias that might exist.”

We are all prone to bias when deciding what to do with our money, whether it’s making a major purchase or deciding how we’d like to save for retirement. It’s important to be able to recognize it for what it is and not let it hijack the prudent decision-making process.

Your trusted financial advisor can help you with these decisions by first conducting a thorough analysis of the financial ramifications for your unique situation, and then second, by helping you identify the course of action that’s most in line with your long-term goals.

If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.

Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020

1. http://go.pardot.com/e/91522/n-engaging-financial-advisors-/93x7yv/2094476491/h/2D9l5kdI01aa_7nBgZIzXkH96hNP311gTIeM1-_k7wI

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