All too often, individuals are eager to draw up a financial plan, but after mapping out the basics with a financial advisor, the client files the plan away and it sits — collecting physical (or digital) dust.
And a dusty financial plan that never gets implemented isn’t worth much.
The reality is this: Financial plans are never “done”.
That may cause you, dear reader, some initial discomfort, but we promise it’s a good thing. Let us explain.
The Best Financial Plans Inspire Action
We’re not pointing fingers here. This is an industry-wide problem. Many people draw up the paperwork required for a financial plan and then stop. We think this happens because most financial plans aren’t very exciting. But our approach is different.
Traditional financial plans are really the vision of the financial advisor. A CFP(r) takes your financial data, plugs the numbers into some formulas, and tells you how much you should be saving and how much you have to spend. Talk about bland. Where’s the fun in that? And why would you ever feel motivated to track down all the needed paperwork and complete some of the tedious tasks that come with implementing a financial plan when it’s all so abstract?
At The Prosperity People, we want you to first articulate your wants, needs, and dreams to us. Tell us what a well-lived life looks like for you. Dream big. Envision yourself five, ten, fifty years down the road. Are you sipping iced tea on a wrap-around porch surrounded by family? Are you hopping on a plane to cross another country off your travel bucket list? Are you able to make sizable contributions to a non-profit that changed your life? That should be the basis of your plan. And that should feel exciting.
Envisioning your future is an essential part of the process, not just because it creates buy-in, but because financial plans are meaningless without implementation. And when you have a good reason to act, you’re more likely to actually do it.
So, what action steps come with putting a financial plan in motion? We break it down into three steps.
Step One: Get Your Financial Ducks in a Row
Most financial plans cover five primary areas to varying degrees:
1. Risk management and estate planning
2. Cash flow
3. Investing
4. Retirement
5. Education planning
In order to implement the initial plan recommendations, many individuals will need to complete additional paperwork, sign off on certain permissions for their CFP(r), and track down account numbers, logins, and financial statements. You may even need to open an additional account or two, work with an attorney to create a trust, or apply for some additional insurance policies.
Not the most thrilling, we know. But remember that vision for your future. That’s why it’s worth the hassle of making the phone calls and doing the work now. When you’re on hold with the customer service rep, just close your eyes and picture yourself strolling through the Napa Valley vineyards on your fiftieth birthday. It. Will. Be. Worth it. We promise.
Step Two: Try Your Financial Plan On For Size
Once you’ve finished getting all your paperwork in place, it’s time to live your plan.
Ask yourself: Are the assumptions we made in the planning stage actually feasible?
If you said you’d put X amount of money into a Roth IRA every month, now’s the time to start doing it. If you’re aiming to increase principal payments on your home loan, set up the new automatic withdrawal with your bank.
Put your plan into action and then see how it feels.
Maybe you’re surprised by how easy your plan is and you’ve found yourself with excess cash flow.
Maybe your savings plan is so aggressive that you no longer have enough money to enjoy your life in the present.
Sometimes ideas in theory, don’t play out well in actuality. And that’s ok!
Regardless of how you feel, it’s unlikely that when you try on a new financial plan it’ll fit perfectly the first time, which takes us to step three.
Step Three: Course Correct as Needed
Make adjustments. If you have excess cash, reengage with your CFP(r) to explore your options. If the initial plan is too limiting, it’s time to make some recalculations.
Doing this alongside your financial advisor allows you to understand the short- and long-term implications of these adjustments so that you can make the best decision for you. Financial decisions aren’t always black and white, but we’re here to help shine light on the grey so you can make decisions with confidence and understand the ripple effect of your financial choices.
Financial Plans Are Life Plans, So Live Joyfully
In many ways “Step Three” is an ongoing stage. Things come up. Needs change.
Financial plans are about the numbers behind our daily lives, so live! And when a curveball comes your way, or when you need to pivot, pick up the phone or shoot us an email so we can be your guide. Not sure what financial changes justify a call to your financial advisor? If it feels significant to you, it’s likely significant to us, too.
Financial plans bring peace of mind, but only when we put them into action. Taking the steps now to ensure your plan is in motion (and not just sitting on a shelf) is a prosperous practice. And when your plans are enacted, your dreams and your reality become aligned.