The Financial Plan or Financial Planning … Which Is More Valuable?

A financial plan is the output, a road map that shares your location today while suggesting ladders to climb and chutes to avoid. It provides insights into what you own, where your assets live, and what your projected income may be. Stretching decades, a financial plan can model tomorrow’s choices based on today’s habits.  

Financial plans are at their best when they’re updated on a periodic basis. As time passes a plan loses its relevance which creates gaps between investor expectations and reality. Like a car or home, a financial plan needs maintenance. There’s a reason why our computers aren’t running on Windows 95 today. Both technology and your financial plan require recurring updates.   

Personally, I believe financial planning to be more valuable than the plan. Why is that? I find financial planning to be friendlier and more relevant, providing investors with answers as they make decisions now. Financial plans often stretch years into the future, a slight shift in modeling or assumptions can change the output significantly. With so much time it’s possible that urgency can fade, as the status quo bias remains.   

Financial planning tends to revolve around the here and now. What steps must be taken next to get things done? The answers arrive by ongoing conversations that provide space in refining your choices. This leads to better decisions with less regret while increasing your engagement.

Revisiting questions over time allows an investor to remain flexible. Priorities and goals change over time because life changes. When you can adapt to new information and life experiences, you’re less likely to be surprised.

Do you know what you want? Is what you want worth it? What’s currently working in getting you closer? Once you achieve what you want, then what? These are the questions to explore through a series of conversations with a financial planner.

Time becomes increasingly more valuable as we get older. Having someone you trust with whom you can speak freely with is what financial planning is all about. It’s not trading, picking the best investments, or active vs. passive management. Plain and simple, it’s conversations that evolve and change as you change and become clearer on your priorities.   

An algorithm cannot express empathy or understanding (not yet). It can’t coach you on how to pay for your child’s college education and manage a big-ticket purchase while balancing the care needs of an aging parent. Life is challenging at times and some activities require more of your attention. The demands of ongoing decisions can be less stressful by integrating financial planning.   

Creating a plan is valuable, but the act of financial planning is more relevant in day-to-day living. Not all decisions may be visible on a spreadsheet or graph. Conversations can be empowering as you verbalize all the themes bouncing around in your head. This can increase confidence and provide reassurance in your decisions so you’re not inflicting damage in the long run.

The ingredients in financial planning include owning consistency and investing time in relationships. Sticking with your strategy regardless of the economic weather. This keeps you grounded with your emotions in check. It can be challenging to do this on your own. Add in financial complexity with personal and professional responsibilities, and there may not be enough time to slow down and think strategically.

“Plans are worthless, but planning is everything” said Dwight Eisenhower and I completely agree.  The purpose of financial and life planning is ongoing chats. This strategy works when you invest the time. Have a question or want to chat? Feel free to reach out below.      

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