Financial Planning Is a Process, Not a One-Time Event

Financial Planning Is a Process, Not a One-Time Event

In the world of financial planning, it’s easy to think that the output of our work is a document called a financial plan that outlines where an individual or family is today, where they would like to be in the future, and what steps need to be taken to get there.  While that is part of what we do, the real meat of what we do is the ongoing adjustments that are made to the plan.

Planning for the future usually requires some amount of predicting the future, which is extremely difficult to do.  A financial plan includes assumptions of rates of return, inflation rates, contributions to investments, life expectancies, and spending needs.  Any one of these would be hard to predict, and the task gets much more difficult when they are combined together.  On top of all of this, unexpected changes in one’s life like a career change, divorce, new child or grandchild, a shift in charitable or recreational ambitions, sickness and death can change priorities and values and redirect the plan. 

A better way to plan is to make it a process, not an event.  It’s alright to create a long-term plan as long as everyone understands that it is an educated guess that needs to be updated as life happens.  Each year, planning should get a little easier because we know what happened during the previous year.  As events in our life and in the financial markets unfold, it is important to make adjustments like saving more each year, retiring at a different age, adjusting the allocation of investments, and making sure we have the right insurance coverage for our circumstances.  Goals are often not achieved until they are written down with a plan to accomplish them, but the most important part of planning is to make it an ongoing process.

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