I got a phone call on the way to work the other day from Jim.
Jim is a long term client who is looking to downsize his family home to release some equity.
The idea was to use the freed up equity to purchase an investment property. I agreed in principle this sounded like a good plan.
We sat down and worked this through in detail and during the course of the conversation set some parameters on what they should be looking for in their new downsized principal place of residence.
Guidelines were agreed on around the property type, size and location.
The weekend passes and on Monday morning I received another phone call from Jim:
“We found something on the weekend and we decided to put an offer on it. It is more than what we said we were going to spend. It is also the next suburb out from where we wanted to live. In actual fact, it looks a lot different to what we spoke about. But we are just in love with the place! And there is one other small downside, it is on a main road.”
Gobsmacked, I paused and asked, “Jim, what is your question in the middle of all this?”
The client said, “I just need a reality check. Someone with no emotional attachment to this transaction to tell us if this is a good thing to do or not.”
Thank goodness I thought to myself.
I took a step back and looked at:
- The numbers. Does it achieve the bigger picture goal we discussed?
- Lifestyle. Does this fulfil the needs from a practical level of raising a family?
After going through it in an impartial manner, it was clear this wasn’t a good move for my client. It was actually a step back.
I conveyed this to Jim and after some deliberation he agreed.
We caught it early and they were able to walk away from the transaction.
So my question is, what are we prepared to be accountable on?
If my client hadn’t had the foresight to seek an external opinion and got caught up in the emotion of the transaction, it would not have been a good outcome and taken them backwards.
I challenge you to put some steps in place to add some layers of accountability.
This may be a financial advisor, it may not.
If it is a financial advisory, just remember, not all advisors are exactly the same.
Some say they will keep you accountable but when push comes to shove, will they pick-up the phone and say “This is a bad decision and I don’t think you should do it.”
Who is keeping you accountable?
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