Is your financial plan flexible enough?

A client of mine, a business leader for many years, recently made a major career decision: she decided to leave the corporate world and join a non-profit organization that aligns with her values. to help others. As a result, she will earn about $100,000 less per year than in her corporate job.

After giving me the news, she surprised me somewhat by saying: I’m so sorry if this ruins my whole financial plan! »

After congratulating her on her career change, I let her know that I understood and applauded her decision. Our lives often take sudden turns in new directions, from starting a family to coping with a long-term illness. The purpose of a financial plan is to achieve a long-term goal, such as financial independence in retirement. As life changes, your plan should change too.

Many of us are tempted to think of financial planning like the first GPS devices of the late 90s: type in where you want to go, and the plan spits out your route – in this case, how much money you need to save each year. Instead, financial planning should be much more like today’s smart navigation apps: always looking for new data, adjusting and suggesting alternative routes.

So, if financial planning is an ever-evolving process, how can you plan for an uncertain future? Let’s look at three major elements of this approach.

Write down your retirement goals

I always encourage my clients to write down their financial goals. Unsurprisingly, most people have never done this before, so this exercise begins to clarify their goals. I ask them to start with a general goal and add details over time.

For example, a general goal may be to retire as soon as possible. Then we look at that goal and consider the impact it will have on other possible retirement goals. By retiring as soon as possible, buying a second home or traveling abroad twice a year will probably take a back seat. Writing down your goal helps develop a financial plan and leads to other more specific decisions.

Then, instead of planning a specific date for retirement and figuring out exactly how much buying power you want to have in retirement, identify the general direction you want to take.

I work with several business leaders who want to get off the corporate treadmill as soon as possible for their physical health, mental health, and family relationships. We therefore build a strategy with a general objective in mind. For example, if they are 45 now, we can develop a financial plan that meets their goals 55 years from now. As they save and invest more, and their expenses in retirement become clear, we understand how close they are to achieving Financial Independence.

Save money for unexpected setbacks

Some curveballs in life can derail even the best-laid plans. Layoffs, business failures and family illnesses are all tragic in themselves. There’s no time a plan needs to be more flexible than when disaster strikes.

A client of mine recently told me that her husband was suffering from a terminal illness. The couple, in their late 50s, planned to work for several more years before celebrating their dream retirement.

Almost immediately, the pressing question was, “Can we afford to retire now and enjoy the time we have left together?” Fortunately, due to their disciplined savings and reasonable level of spending, the answer was yes. None of us can guarantee that we can avoid these times in life. But we can be prepared with financial options if and when they appear.

Review your financial plan and determine if it needs to be adjusted to take advantage of a new opportunity or face an unexpected obstacle. Maybe there’s an opportunity right in front of you: finally open that yoga studio or travel abroad to explore your family history. Review your goals and allow yourself to change them as you go through life.

Consider opening a brokerage account

Saving money in a 401(k) retirement plan, an individual retirement account, and a 529 college savings plan are smart choices. However, all of these accounts have restrictions on withdrawing funds too early and without penalties.

It is essential to save money that can be used at any time and for any reason. Getting started and saving in a taxable brokerage account can be one of the best decisions you can make financially because it offers these options. You can start small with a few thousand dollars and build it over several years.

Need to be away longer between two jobs? A taxable investment account can help bridge that gap. What if, one day, you could stop working at 55 because of the success of your start-up or stock options? Your taxable account can provide liquidity until you reach age 59.5 or older and can access your retirement accounts without penalties.

Remember that life is uncertain and good planning should take this into account. Know which direction you want to go, save money and give yourself the advantage of having options when there is a fork in the road.

Associate Wealth Advisor, Brightworth

Josh Monroe is a CERTIFIED FINANCIAL PLANNER™ Practitioner and Certified Financial Advisor who actively listens and plans thoughtfully to help clients achieve their goals. He joined the Brightworth team in 2019 as a financial planner. Prior to Brightworth, Josh spent eight years at a leading insurance and investment firm in a variety of roles including compliance and oversight. Josh is passionate about financial planning and makes complex concepts easy to understand.