Plan for the Plan Not to Go According to the Plan
In his bestselling book The Psychology of Money, author Morgan Housel states, “Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.”
I LOVE this statement. It rings true for every single client we work with, no matter how well-off or financially independent they may be. Why? Because no matter how sophisticated the planning software, no matter how experienced the attorney is, and no matter how accurate the market forecast, something unexpected will happen. Actually, many unexpected events will happen that were not part of your original plan, and we see a huge opportunity to plan for the unexpected.
Have you ever met with a financial advisor who built out a “retirement plan” for you that showed you passing away with an astronomical amount of money and thought to yourself, “This guy is out of his mind?" It’s not uncommon. I know because our team builds them quite often. The problem is that many advisors present this as the final plan (“You’re good to go! No need to do any more planning here!”). When in reality, it should be considered a rough draft starting point.
True Financial Planning
The goal of true financial planning is not to predict your stock returns 25 years from now, though this calculation is useful in the planning process. The goal is to help clients give their money a purpose. Sometimes, unexpected events add stress to a plan, and funds should be set aside for investments or insurance to mitigate the risk of unplanned events. However, my favorite type of unplanned event is when a client realizes that they’re never going to be able to spend all their money, and it happens far more often and at lower asset levels than you may think. In these cases, other funds can be used to realize dreams and make a difference in the world that will outlast the client’s lifetime.
Dynamic financial planning, which takes into account multiple contingency scenarios both good and bad, provides a much clearer picture of the potential risks as well as potential opportunities. It helps our clients to confidently enjoy their money while feeling more at ease that they will not overspend their financial limits. Whenever we see “astronomical numbers” in a planning simulation, we don’t conclude there is no need for planning. It tells us that there is an opportunity here to potentially achieve far more than the client originally expected.
If you haven’t created a solid financial plan that gives your money a purpose, please reach out to one of our financial advisors or Certified Financial Planner (CFP®) professionals to see how we can help.
Provista Wealth Advisors in Greenville, SC, provides peace of mind through personalized asset management, expert estate planning, and retirement planning. Navigate your financial journey with confidence. Rest Assured, We Have A Plan. Give us a call at (864) 696-2410 or send us a message to schedule your free introduction meeting.