We Know the Difference Between a Financial Plan and a Paperweight.
“Financial Planning” as a deliverable product doesn’t make much sense. Attempting to build a rigid framework that looks forward twenty to forty or more years is suspect. To prove this to yourself, look back at your life twenty years ago: Did you envision your personal and professional situation precisely as it is now?
Unlikely.
The Solution? Agility.
You must develop and maintain a financial plan that doesn’t lock you into a pre-determined course. A plan is great, but building a rigid step-by-step manifesto will likely do more harm than good.
We’re all humans; we change, evolve, and adjust our spending and saving plans depending on our outlook and expectations. Denying this and charging forth into a vortex of uncertainty in a “Damn the torpedos” manner could likely get you sunk.
Instead, carefully construct a short-term plan juxtaposed against a long-term framework using dynamic tools that update frequently. Put your head on a swivel and build some guardrails to stay between so you know when you must course-correct.
Build your plan this way, and you’ll accrue the highest odds of having a great retirement.
No part of this strategy involves printing reams of an outdated regurgitation of your current finances delivered in an embossed leather binder with your name on it, compliments of your here-today-gone-tomorrow financial planning intern.
No One “Fails” at Retirement.
Don’t let others sell fear to you. No one “fails” at retirement. You adapt.
Retirement is the same as the rest of your life: You do your best with what you have. If life throws a curveball at you, you adapt and figure it out.
You’ve done this your whole life; why would retirement suddenly be “PASS/FAIL”?
Most modern planning solutions run Monte Carlo simulations1 based on historical risk and return metrics and provide you with some ‘odds of success’ as if you were replaying your whole life… and then disclaim to you that past performance is no guarantee of future success.
OK, so tell me exactly what the point is. (Other than a fear/sales technique)
We ask a lot of questions. We have conversations with you. We’ll do data input with you. We’ll all spend the time to get a total handle on your present situation. Skip this step at your peril.
Then it’s SWOT time. Let’s talk about your strengths… and our strengths, and how we can complement or fill in around your strengths. Good at saving? Ok, then let’s put together a dollar-cost-averaging plan for you. Play to your strengths.
Weaknesses? None? Right. Let’s be humble and talk about what we’re not very good at. Is financial self-control an issue? Do you have money anxiety? Do you stress about investing so much that you leave money on the table?
Is therapy the answer? Or meditation? Let’s figure it out before the Xanax prescription runs out.
Opportunities and Threats
Come up with a plan to implement when truly threatened (job loss, death in the family, natural disaster, etc.)
Recognize that many perceived threats are actually opportunities for sophisticated investors with agile financial plans. Is the stock market down? Most investors view this as a threat to their portfolio or retirement plan. Thoughtful, sophisticated investors with a dynamic financial plan see market selloffs as opportunities to increase equity allocations to grow wealth quickly on the rebound.
Opportunities abound, but they usually first appear as threats. Let’s make a plan for that.
- The term “Monte Carlo Simulation” is named after the city of Monte Carlo, known for its casinos and games of chance. The name reflects the element of randomness and probability inherent in the simulation method, similar to how games like roulette involve random outcomes. ↩︎