None of us know what’s going to happen today or tomorrow so it seems there’s little point trying to map out what’s going to happen us for the next 20 or 30 years. Yet this is what we expect people to do when they put a proper Financial Plan in place.
Financial advisors ask clients like you to make a myriad of assumptions about how much money you’re likely to earn, how much you’ll spend, the level of savings you’ll put aside and the type of lifestyle you’ll want to lead when you retire.
Planning requires us to talk about the future we want in order to define our goals and plot a course to achieving them. The assumptions you make are your best guesses and it’s important that we understand that and do not obsess about them.
In the real world, the minute we finish a plan it can be outdated. Life constantly throws the unexpected at us and, because we’re human, we make mistakes with our finances that can throw the best plan in the world off course. We need to understand this and be really clear that a plan can never allow for all eventualities.
However, the process of planning is critical and developing a plan has undeniable advantages if we acknowledge that the underlying assumptions will constantly need to be tweaked to reflect changing circumstances.
So, acknowledge that we don’t know what is going to happen, accept that the plan is a guide rather than a definitive map and realise that we will constantly need to make adjustments as we journey through life. In those conditions, a proper Financial Plan can play a vital role in our lives and help us to overcome the emotion that overtakes the best of us when we make decisions about our hard-earned money.
The role of a proper Financial planner is key here (I would say that I suppose!). Our job is to tell you that we don’t know what is going to happen but, because we have a lot of experience, we know how to deal with the changing environment. It is our job to ensure you are clear on your goals and that you have specific actions that will help you reach those goals. Most importantly, it is our job to help you make adjustments to your plan year after year when the unexpected happens.
Enda Brady BBS, QFA, SIA, CFP®
A Certified Financial Planner™ professional