In this article, taken from his free blog, Tony’s View, Tony laments the lack of thought callers have put into thinking about what they want out of life, what their goals are, and why they do what they do.

What are your goals? By Tony Alexander

Some of the callers ask very specific questions along the lines of whether they should sell their property and spend more time in Rarotonga (a 70- year-old) or having two properties whether they should sell one and remove debt off the remaining property.

There is no specific answer I can give without knowing what their goals are. And that seems to be the missing element in most of the questions I get asked. People default to thinking in terms of making as much money as possible, but they haven’t really taken the time to figure out what is best for them and those they hold dear.

Sometimes during physical presentations and webinars people ask if I had a million dollars what I would do with it? People assume my goal is maximum growth in wealth and that I would invest in things which would produce the most money over an unspecified period of time.

I’m not really sure they understand when I reply that I’d place some of it in a bank account and put most in a diversified portfolio focussed on international shares. I’d park it out of sight so I could get on with my life without the hassle of trying to eke out the maximum return from money I might never need or use.

I can give people a forecast for how much I think average house prices will rise over such and such a period of time. But I have no idea what debt people carry, what their income sources are, why they bought an investment property in the first place, when they think they will die, how much money they want to leave their descendants, what their other income sources are, how much income they need from the property, what their ability is to boost property income, what other assets they hold, whether they are risk tolerant or risk averse, whether they seek income flow or capital gain whether they work or not, what their timeframe is for needing money built up over time, and so on.

Basically, none of their questions can be easily answered, and ultimately what I try to do is get callers to think about what their goals actually are. I feel most people haven’t really thought this out. They’ve invested in residential property because it is accessible, because lots of other people are doing it, because they feel they had been missing out on some simple gains, and because having more wealth seems better than having less.

But how much is enough? The chances are most people have never sat down and calculated what amount of dollars they need to be able to meet the goals they have for their life.

The starting point of course must be figuring out what those goals are rather than just blindly doing what the Joneses are doing.

This sort of myopic follow the crowd process doesn’t just happen in the residential property market. Young people are flocking to crypto assets. By and large they haven’t any idea why anyone needs any of the cryptocurrencies they buy (they don’t), and they have no understanding of how such assets will be heavily regulated once central banks get their mojo on and governments act to stem the criminal activity which cryptos facilitate.

But they’ve read the stories of people making quick gains, they’ve been brought up to believe more money is better than less, and they can easily get into the crypto game using apps – just as they can also easily get into share trading using the many excellent apps which are out there.

Is there anything wrong in young people doing this? I don’t think so. The best money I ever “spent” was the $200 I lost in 1981 trading shares. I learnt about my lack of ability to stick with a trading strategy in the face of losses and the lesson helped guide my financial choices in life from that year on. Things seem to have turned out okay.

In my experience, most people haven’t found out what they are good at, haven’t found out what they have a passion for, haven’t found out what they can do to produce a good regular flow of income, and have definitely not calculated how much is “enough”. All they know is that more is better than less. I guess that’s where global warming and wars come from.

But most people are working nine to five in jobs they do begrudgingly simply for the money to live – to feed their family, to provide a roof over their heads, to purchase some good things, and to contribute to a retirement with more than just the basic superannuation.

So, I can perfectly understand the desire to grow some wealth through purchasing an investment property or trading crypto assets.

But ultimately the question still needs to be answered before you ask what I would do with a million dollars or what you should do with your current assets, debt, and income. What is it you want to achieve before you depart? How much money do you need to do that? How much is enough? I suspect for the average folk which I went to school and varsity with the answer is not actually all that much in dollar terms.

And that ultimately leads to this question. If you have an investment property and you’ve seen its price rise by 35% since we entered the first nationwide lockdown in March last year, how much more wealth growth do you need to achieve your life goals? How much more risk do you need to take? Would it be so bad if you sold, banked the profit in a highly diversified portfolio (see a financial advisor) and allowed some struggling, highly indebted first home buyer to get a home in which to raise a family as you might already have done?

Figure out what it is you want. Only then can you figure out what to do with the assets you currently have and those you are able to acquire.

Thank you Tony Alexander for your insightful thoughts on a topic we hear every day. “What are you really trying to achieve,” is sometimes hard to establish, when sitting down with prospective clients, especially when they weren’t expecting to have to think too deeply about their lives? Find Tony's view here

Keep asking great questions …