What is the difference between investing and having a financial plan? While investing can be fun and invigorating, especially when everything is going well, there will inevitably be a time when performance suffers and this is when having a financial plan is critical. A financial plan provides a “purpose” to your investing. When we have a purpose we also have determination to accomplish a goal, such as retirement, and it will carry us through the good times as well as the bad. Too many financial plans fail because of poor decision making, usually during hard performance years like 2000 or 2008. If we can assign purpose to investing it can help squelch emotionally driven decisions, and in turn help the probability of the plan.

I have seen this same concept play out in my running life recently. I used to have goals and purpose in my running, which made hard workout days or days where injuries were popping up easier to train through. Nowadays I really just run for the fellowship, and on days that I don’t feel top notch (most days now) or it is raining hard, I will recommend to my running partners that we go to Starbucks instead of doing our planned run. If my purpose in running was to still run personal records or win races, then I would be significantly disappointed in the results as I don’t follow that training plan anymore.

So, before investing, determine what goal or outcome you want to accomplish. Invest purposefully for that outcome and keep your concentration on the goal while going through the process. This will help achieve a better probability of success – and as an additional bonus, it also means you just completed the first phase of a financial plan (the rest are mainly mechanics discussed in other blogs).