Happy day to you. This is Ken Kaufman and I am thrilled you’re here for Episode 67: Diagnose then Prescribe. Now, there are a lot of financial planning and tax and investment and insurance ideas and strategies that are floating around out there. The media is willing to throw them out with flashy headlines sometimes and say things like and these are just examples, “You need a Roth IRA,” and then the next day, “You need a traditional IRA,” and then the next day, “You should invest in a backdoor IRA,” and then the next day, “You should put money into your 401(k),” and then the next day, “Don’t put money into your 401(k).” The next day, “You should buy a life insurance policy that also allows you to invest your money into that policy and build up a cash value.” And then the next day, “You should only buy term insurance and never have a cash value associated with that term insurance,” or you might hear somebody say, “Don’t waste your time and your money building a comprehensive financial plan. You just need to do this.”
I could go on and I could go on with this. Here is my point. My issue with all of this random non-customized “advice” is that they likely are missing the mark, and they’re missing the point. For example, would a doctor prescribe her patient a specific remedy without first doing a proper diagnosis? Would a lawyer draft a will for her client without first assessing if the will is actually going to fulfill the desires and wishes of the client? Would a building contractor just randomly start building a house for a new customer before they get a fully vetted set of plans from the architect where the architect and the clients have gone back and forth to figure out and to get a full understanding of exactly what those clients want? It makes sense that they wouldn’t do these things. In all those scenarios I just mentioned, if they were to do those things, if a medical doctor was to give a remedy before doing a diagnosis or a lawyer to draft a will without first finding out and diagnosing what the actual needs are and desires are of the client, or a builder to start building a house before they even find out what it is the client actually wants, in those scenarios, that would be considered some form of malpractice. Totally inappropriate—prescribing some solution before completing at least a limited diagnosis if not a full and comprehensive one.
So, this is the message today: make sure before you’re executing on some financial strategy or plan that somebody’s pitching to you, putting in front of you, you’re reading in the media, or perhaps you’ve even come up with yourself. Do not allow yourself to jump past the diagnosis phase and just start trying to solve financial problems by doing random things that may or may not create the right outcome especially when you look at a whole comprehensive or an overarching picture and long-term goal and strategy and the overall why for your money and for all of the time and work you put in to try to build your net worth and the sacrifices that you’re making along the way.
I especially do not want you to let yourself be suckered into flashy headlines or even commission-hungry sales representatives. Now, I’m not saying that everyone is out there trying to hurt you or take advantage of you. In many cases, the products that are being sold and the services that are being sold are helpful. The question is: is it right for you? Because not everything is the best option and the best solution rot he best remedy or the best prescription for your situation and for the problem that you’re trying to solve.
Before you take any action, you should be demanding a full and comprehensive diagnosis first. If you’re a do-it-yourself, do a full financial plan. Don’t leave anything out. Go to the ends of the ends to look at all of the areas of your life that need to be considered and taken into account before you start executing on specific small strategies because ultimately those small strategies could end up going in the exact opposite direction and taking you in the wrong direction as opposed to creating the right outcome for you.
If you demand this comprehensive full diagnosis and the person who is recommending these things or the news article or whatever it is, if it does not have the opportunity to provide you a full diagnosis before giving you a prescription, then I highly recommend you back away. You find somebody who can help you do that full diagnosis and help you find that right set of prescribed solutions that will help you accomplish what it is that you have in front of you—these goals, and long-term visions, and the ultimate reason for why you put all the work in, and why you make all the sacrifices to build up your net worth. What does that really mean to you? You need somebody who can help you figure that out and be part of the overall diagnosis or treatment plan if we’re talking in a medical setting and then recommend to you the very best options for executing on the remedy that they are prescribing and that they’re saying, “This is how we can help you solve this,” or, “This is how we can help you accomplish this.”
That’s it. Do the diagnosis before you jump into the prescription process and execution. Many, many thanks to you for joining today. This is a wrap for Episode 67. Happy day!