We all have financial goals that we want to achieve but setting them isn’t enough. If you really want to make a change in your life, you need to commit to a process guided by a professional financial professional who works aligned with an academic proven methodology.
Do you know someone who is trying to get in better physical shape? Maybe they’ve spent months researching various workout regimens and diets but haven’t taken any meaningful action. Perhaps they’ve even created a comprehensive plan to lose those extra pounds and improve their overall health until they take action though, the plan is just a plan, many of which fade into oblivion despite well-meaning intentions.
Financial wellness works similarly. Sometimes a plan is a binder filled with pages of charts, goals, analyses, and assumptions. I’ve seen plans that are hundreds of pages long, I’ve even created a few. I imagine most of these stacks of paper sit on a shelf or in a drawer until tossed in the garbage or shredded years later. Plans of that size can be overwhelming and intimidating and usually end up in the bin.
The more I’ve talked with clients, experienced financial events myself, and worked with other advisors, the more I’ve realized that most of the value isn’t in the plan itself; it’s in the planning process.
Aligning Values and Finance
It’s easier not to think about finances (in the short term anyway). Money talk can be stress-inducing. Since we have minimal information about the future, we’re throwing darts at a board of possible outcomes. It doesn’t have to be this way, though. We don’t have to try to predict every life event. We can acknowledge that there will be surprises, big and small, good, and bad. That’s what makes life so interesting.
Another way to approach planning is to discuss your values and goals. It’s not just about finding your retirement “number” and backing into a plan. Life by spreadsheet isn’t a way to exist.
Instead, have discussions about what you are living for. What excites you? What do you genuinely enjoy? What keeps you up at night? These discussions help ensure that your financial plan makes your life fulfilling. The goal isn’t to die the richest; it’s to live the life you dream of.
Adjust Your Plans as Needed
In my career I have organized many courses and seminars overseas, a great deal of preparation goes into preparation. The team charts the seminar program from their starting location to their destination and every minute in between. They even check the weather forecast and ensure they’re aware of all possibilities of changes.
Despite taking into account all the variables, sometimes things just do not work out (Who could forecast the COVID crisis or the Russia – Ukraine war).
You may think your life is standard, with minimal variability. and maybe it has been, but from my experience surprises are lurking around the corner. Don’t worry; these are often unexpected positive events. Life sometimes presents pleasant financial surprises despite our tendency to only consider the bad and the ugly, focusing on events that could derail our plan. It might be hard to believe now, especially if you’re experiencing hardship, but something unexpected could improve your financial situation down the road.
So, we must have something that is clear and that is the methodology (as published by FPSB – (Financial Planning Standards Board) :
- Establish and define the relationship with the client: the financial planner informs the client about the financial planning process, the services he or she offers, competencies, and experience they have. The financial planner and the client determine whether the services offered and his or her competencies meet the needs of the client. The financial planner determines if he or she has, and discloses, any conflict(s) of interest. The financial planner and the client agree on the services to be provided. The professional describes, in writing, the scope of the engagement before any financial planning is provided, including details about the responsibilities of each party (including third parties); the terms of the engagement; and compensation and conflict(s) of interest of the financial planning professional.
- Collect the client’s information: the financial planner and the client identify the client’s personal and financial objectives, needs, and priorities that are relevant to the scope of the engagement before making and/or implementing any recommendations. The financial planning professional collects sufficient quantitative and qualitative information and documents about the client relevant to the scope of the engagement before making and/or implementing any recommendations.
- Analyze and assess the client’s financial status – the financial planner analyzes the client’s information, subject to the scope of the engagement, to gain an understanding of the client’s financial situation. The financial planner assesses the strengths and weaknesses of the client’s current financial situation and compares them to the client’s objectives, needs, and priorities.
- Develop the financial planning recommendations and present them to the client – the financial planner considers one or more strategies relevant to the client’s current situation that could reasonably meet the client’s objectives, needs, and priorities; develops the financial planning recommendations based on the selected strategies to reasonably meet the client’s confirmed objectives, needs and priorities; and presents the financial planning recommendations and the supporting rationale in a way that allows the client to make an informed decision.
- Implement the financial planning recommendations – the financial planning professional and the client agree on implementation responsibilities that are consistent with the scope of the engagement, the client’s acceptance of the financial planning recommendations, and the financial planner’s ability to implement the financial planning recommendations. Based on the scope of the engagement, the financial planner identifies and presents appropriate product(s) and service(s) that are consistent with the financial planning recommendations accepted by the client.
- Review the client’s situation – the financial planner and client mutually define and agree on terms for reviewing and reevaluating the client’s situation, including goals, risk profile, lifestyle, and other relevant changes. If conducting a review, the financial planner and the client review the client’s situation to assess progress toward achievement of the objectives of the financial planning recommendations, determine if the recommendations are still appropriate, and confirm any revisions mutually considered necessary.
So, it is my advice to just embrace the process and not only the plan, be optimistic and steady, and finances can be empowering and not anxiety-inducing.