Set It and Forget It
Why Financial Planning isn’t a One-and-Done Exercise
Nearly all of us have seen the legendary Ron Popeil championing the benefits of his Ronco Showtime Rotisseries and can hear his catch phrase, “Set it and forget it.” In a world where we like to do things once and not worry about them again, why can’t we approach our financial planning this way?
Why We Can’t Set It and Forget It
Life Happens
Have you ever noticed that life doesn’t go exactly the way you scripted it? Kids are born on Jan 1st, robbing you of a nice tax break, relationships end, jobs change, weather is unpredictable, uninsured motorists are drawn like a magnet to your car, your back falls apart after age 40. Whatever the events are, life changes, often not in the way we planned. All of these changes can impact what you’re working and planning so hard for.
Market Changes
You’ve probably experienced some volatility-induced panic at some point in your life, fueled, in part, by a media industry that thrives on predicting doom and gloom. These completely normal and completely temporary fluctuations in the value of your investments mean that regular adjustments need to be made. This isn’t a prescription to time the market or panic into cash. The best thing we can do is take advantage of the opportunities granted us by a volatile market. Things like strategic rebalancing and systematic tax loss harvesting can be great ways to better your position and long-term success. Absent that, the second best thing we can do is…nothing, which is often much harder.
Goals Change
Can you remember a time when all you wanted in life was that 1969 Mustang Boss 302 and a weekend to hang out with your friends? Then you got married, had kids, got a mortgage, got into World War II history and smoking meats. Over time, the things that are important to us change and require us to make changes to our plans as well. Bye bye Mustang fund, hello college fund.
Tax Code Changes
Everyone’s favorite Uncle, Sam, changes his rules all the time for how we get to pay him (and how we get to avoid overpaying him with good planning). Even though taxes will be everyone’s largest debt over their lifetime, many people spend very little time on tax planning. We often take a rear-view mirror approach to taxes. What happened throughout the year? What do I owe? Any last minute things I can do to lower that? What if, instead, we took a front windshield approach to tax planning and worked to lower our annual and lifetime tax bill on a proactive basis? This approach requires more intentionality, but can lower your lifetime tax rate by hundreds of thousands of dollars.
So, What a Person to Do?
Instead of treating your financial plan like a Ronco Showtime Rotisserie, think of it as a living, breathing entity that requires attention, care, and sometimes a little creativity. Here are some tips to keep your financial plan fresh:
- Regular Check-Ins: Check in on your financial plan at least once a year (more often if life is throwing you curveballs). We meet with every client in May and October to align with tax planning, but it’s critical to review at least annually.
- Adjust as Needed: Don’t be afraid to tweak your investments, budget, or goals. Your financial plan should be as flexible as your favorite pair of sweatpants.
- Consult a Pro: If tracking all of this starts to feel overwhelming, remember that you don’t have to do it alone. A good financial advisor (like yours truly) is always ready to help.
