So many people believe that financial planning is a one-time event. They go to see an hourly financial planner, have a plan created, and pat themselves on the back – they did it! Then they check that box on their to-do list and move on with their lives.
Unfortunately, this isn’t how financial planning works. Your financial plan doesn’t stay “right” or “perfect” after you create the first iteration. Too much is going to change over the next 10-20 years for the initial plan you put together to have any legs when it comes time for retirement. In fact, in most cases, your life is going to change too much in the next two years for your initial financial plan to remain accurate. In short, the first financial plan you’ve put together is likely wrong. If it’s not wrong yet, it will be soon.
You Can’t Time the Market
One of the biggest reasons your financial plan grows stale is because timing the market is impossible. If you ask any financial planner worth their salt what’s going to happen with the market over the course of the next several years, they’ll answer honestly:
Everyone has some predictions in their back pocket, but financial planners know that investment strategies may need to be adjusted based on how the market acts over the next few decades. However, there is one consistent concept that planners will preach to all of their clients:
Time in the market is way more important than timing the market.
You’ll have less work to do if you focus on passive, low-cost investing (yes – even if the market takes a nosedive!). Investing consistently and staying the course is in your best interest, and your financial planner can help you to adjust your plan as needed based on market trends.
Your Needs Aren’t Predictable
It’s hard to predict what your needs will be during retirement. Life changes so quickly and planning that far in advance is a recipe for disaster. We can take a best guess or two, but ultimately you’ll need some wiggle-room in your financial plan to adjust as your needs change. This is true both for positive changes in your needs and negative, unexpected life events that could impact your finances.
For example, coming into a significant amount of money that you weren’t anticipating from a recently deceased, distant relative is unexpected and could notably bolster your retirement savings and adjust your strategy. On the other hand, a medical accident could result in needing long-term care or home health care throughout your retirement, which could dramatically increase the amount of money you’ll need as a retiree. At the end of the day, we can plan all we want – but life will laugh and continue on regardless of our plans. Your financial plan will need to adjust and change as your needs change.
Your Goals Will Change
Finally, your goals are going to shift – which will impact how valid your financial plan is. As a young investor, you might think that you know exactly how you want to use your wealth as you move toward retirement. However, the majority of people start to rethink their goals (financial or otherwise) as the idea of leaving a legacy becomes more relevant to them. You might surprise yourself – many of my clients end up setting big goals later in life such as going back to school, or setting up a scholarship fund at their alma mater. Staying open to new goals as you move through life, and staying equally open to what that means for your financial plan, is key.
Ask “Why” – and Adjust Accordingly
Even though your financial plan won’t be “perfect” forever, that doesn’t cancel out the importance of having one. Instead of viewing financial planning as a stand-alone event, or a “to do” to check off of your list, we need to rethink how we look at financial planning. It truly is a journey, rather than a one-time task. As your needs and goals change, and as the market shifts in coming years, your financial plan will need to evolve.
This is where working with a financial planner in an ongoing capacity can be incredibly helpful. As a financial planner, I work with clients through every phase of their lives. I help them through big life events like a divorce, the loss of a spouse, or retirement. I guide their saving and investing strategy as their financial needs or lifestyle goals shift over the years. Want to learn more? Schedule a call with me today – you don’t have to continue your financial planning journey alone.