Share this article
Share this article
See our LinkedIn profile
Share this page
Print page
View PDF

Financial Planning

Financial Planning

Posted Monday, September 17, 2018

Financial planning is much more than plugging a few numbers into a financial calculator or website and getting “your number.” A retirement checklist is nice, but it is only a tool in the financial planning toolbox. Retirement and financial planning is a comprehensive on-going process as the image to the right illustrates. Pretty pictures are just that.. let’s break this down and drill into some of the finer details.

Financial Planning Benefits

As mentioned elsewhere, there are three major asset and wealth components-

  • Accumulation (fun and exciting part)
  • Preservation (tricky part)
  • Transfer (necessary evil part)

To be successful with each of these components requires financial planning, but beyond these considerations financial plans offer three exciting benefits-

Define Goals and Objectives

How do you create a plan without a goal or an objective? You don’t of course, but at the same time you might need help defining and shaping your retirement goals. A good financial team will run through a checklist of various things. A great financial planning team will dig deeper into your financial world than some checklist to determine the root reasons for your goals and objective. For example, people might say that want to help pay for education, but the root cause of this objective might be deeper than that. Parents could really be saying that they want to help their children transition from childhood to adulthood, and education is only a part of that transition.

Create A Custom Blueprint

Colorado Springs has a home builder who has built the same model no fewer than a 1,000 times. The framers could probably build the house with their eyes closed, yet a blueprint is still used. Same with a financial plan. And to continue the house motif, most houses have four walls, a roof, a kitchen, a bedroom, etc. But what makes your house a home are the finer details such as paint colors, carpet selections and furniture. While most people have the same major retirement goals, your financial plan must be customized for your unique situation including risk mitigation.

Measure Success

A financial plan allows everyone on the financial team to measure success. If a plan has been created, reviewed and signed off by everyone, then it is easy to use that as a measuring stick and keep everyone accountable. Remember, your financial team includes you, your financial advisor, your tax professional and your estate planning attorney. Having a plan and referring to the plan gives you confidence in your path to success.

Remember the quote from The Hunt For Red October-

Admiral Painter “What’s his plan?”

Jack Ryan “His plan?”

Admiral Painter “Russians don’t take a dump, son, without a plan.”

People don’t plan to fail, but most fail to plan!

Financial Planning Process

The financial planning process has three components. First component is analysis where you identify your personal goals and then prioritize your financial goals in terms of urgency. Next component is developing a strategy which starts with gathering financial information and analyzing the data to develop solutions.
Financial Planning
The final component is the most challenging and is the largest stumbling block. The last component is to implement the plan, and then review and monitor the progress. The financial planning process starts all over again with identifying your goals and objectives, to ensure that things haven’t changed. When you were eight years old, your priorities were Otter Pops in the freezer. When you were 25, beer in the fridge.

As you move through life, your objectives and tastes change, so the financial planning process must repeat itself to capture these changes. Your cash flow needs will change through time as well. 50s and 60s see a lot of travel and eating yummy food. 70s and 80s see a lot less travel, and more medical expenses.

Retirement Checklist

A retirement checklist that is comprehensive and meaningful to you cannot be found on the internet or in a book. Sure, as mentioned earlier there are topics and objectives that cover 70% of what you need. In other words, everyone has the same 70 items on their retirement checklists. But the remaining 30% must be unique to you, and must be vetted out and reviewed by a competent financial team which includes you, your tax professional, your financial planner and your estate attorney.

Some things to consider- Do you want to leave a legacy for your heirs or will your check to the mortician bounce? Is your retirement a cliff retirement like an airline pilot or a slow slide into retirement with consulting work? How critical is debt reduction? Our physical longevity is outpacing our mental cognitive abilities necessitating long term care planning. This list could go on and on, and answers to these basic questions will probably yield more questions than answers.

Be weary of the one-size-fits-all retirement checklist. You are you.