I once had a client who asked me, point-blank: “Do I have enough money that I can fly business class the rest of my life?”
So, we had a few discussions and I drew up her financial plan. The answer was “yes.”
Talk about a happy customer!
And that’s the important point about financial planning that too many people miss.
It’s not about getting the “bad news.” It’s about arming yourself with real information for life, about changing your future, and yes, it’s about traveling business class if you want and can afford to.
Too many people stop half-way. They think financial planning is about picking an investment or a financial advisor and that’s it.
While choosing an investment and an advisor is important, I tell them it’s only half a solution.
You can settle on a way to grow your money, but what about how you spend it?
The whole picture
What about big life events, like getting married (or divorced), having kids, or owning a home? What about your life in retirement, or a second-act career?
All of those big decisions will affect your investments, and that’s why it’s important to complete the process by having a solid financial plan.
When you create a financial plan, you get your arms around your whole financial picture instead of just one component on its own.
Yes, a big part of it is the investment. Your financial plan will start with your investment allocation (what you invest in and why) and the resulting growth of your savings over the years.
But you also have to understand household income and your expenses, both before and after retirement.
In financial advisor terms, it’s all about what you need to save in the “accumulation phase,” that is, when you’re saving and working. Then “decumulation,” when you’re in retirement and withdrawing money.
What will your lifestyle be like? What are your dreams and goals for the rest of your life?
A robust financial plan will take into account the full range of factors: risk management, your legacy, and tax-efficient investment strategies.
A sound plan also takes into account the other professionals you may need, such as a qualified tax advisor and, in some cases, an estate planner.
It’s very hard to look at things in a vacuum, and money absolutely shouldn’t be looked at in a vacuum.
Everyone should go through the exercise of a financial plan at least once. But the real value comes from keeping in touch with it and following any recommendations laid out and adjusting direction as needed.
A great plan can be eye-opening. You learn exactly what resources you have and find out about gaps early — while you can still do something about it.
You might find out that you can spend more than you thought. It’s very common for serious long-term savers to over-prepare and then underspend in retirement.
If you knew that you could buy a new car, take a trip, or help fund your grandkids’ college education without risking your own financial security, would you? Of course you would! A plan helps you make those choices with confidence.
Our motto at Rebalance is simple: Live well and retire with more. That’s the value of financial planning, short and sweet.
It’s not about the money, really. It’s about being able to live without worry. It’s about freedom.