Financial Planning

We get calls every week from people wanting to do a financial plan; but almost no one who calls is familiar with what a financial plan really is.

Folks are calling because they feel a bit lost and overwhelmed with their personal finances and they want a professional to give them very clear feedback and advice.

Am I saving enough for retirement?

Are my retirement investments positioned optimally?

How will the cost of college impact my ability to retire?

Will I be able to pay for my kids’ college?

Will I be able to retire when I want?

Will I have to sell my house and move someplace less expensive to retire?

How much can I spend in retirement?

In short people mostly care about 3 things:

1. Retiring with a comfortable lifestyle.
2. Sending their kids to college.
3. Not running out of money (tied to #1 but a separately expressed concern).

The financial planning process addresses all of these things and more if doing a comprehensive plan.

Through the financial planning process the following may also be considered:

• Insurance coverage including: life, health, property and casualty, long-term care and disability
• Taxes
• Mortgage and potential refinance
• Other debts including potential future purchases
• Cash flow/budget
• Potential career moves
• Inheritance
• Home remodeling
• Social security
• Medicare and potential expenses at the end of one’s life
• Stock options
• Home purchases
• Estate planning
• Investments including current 401(k) allocations

A person trained in financial planning will have studied all of these things and take you through the entire process. It’s real work and it takes time. Many people can get stuck on gathering all the items required to complete a plan but if the plan is done well, in my experience, the person going through the process always derives great benefit and gains valuable perspective. Don’t get stuck!

Outcomes from the plan should include odds of success along with specific action items, and a plan for completion, involving anything listed above. Depending on when changes are implemented for/by the client the impacts can literally be life altering with respect to someone’s standard of living in retirement. The sooner the better.

“Plans” in the financial services industry are sometimes given for free as a way to engage the client so they might be retained on a permanent basis. “Plans” are also sometimes offered by firms for free as a means of saving a client relationship where the advisor has been paid for years to do very little but charges a lot. These types of plans can not only be sub-optimal but damaging.

In a better world, more people would be familiar with the concept of planning their finances and go through the process relatively early in life, revisiting the plan as their life changes. We meet with some people early, especially when they’re wondering about buying a house, but we’re continually contacted by people not too far from retirement.

Whether someone is young or old, a financial plan adds a measure of control over what can seem like a chaotic part of life: finances. Most people enjoy the feeling of clarity they gain from going through the planning process and the feeling of power that comes with acting on the plan.