Importance of Remaining a Part of your Financial Plan

Paul Miller |

There is only one person that your financial planning process should be focused on: yourself. The plan that guides you toward, and through, retirement should be built for you buy a financial advisor that understands your needs. A good financial advisor will put together the perfect plan to suit your needs, but a great one will offer you a strategy that includes wiggle room based upon your specific interests and goals for your future. It is vital that you remain involved in your financial planning process from start to finish. After all, you are the most important aspect of the plan! So, how can you do it?

Be Honest

You can mislead your financial advisor if you like, or simply fail to disclose where your money goes and what your priorities are financially, but the only person that impacts in the end, is you. The first step in any financial planning process is drawing up a budget that details where your money goes. Figure out which expenditures are most important to you (food, housing, essential bills) and then figure out what items you could live without to save money. Keep a notebook handy if necessary to figure out what purchases you are making outside your essentials and you can track where and when you are spending money on non-essentials.

Set Workable Financial Goals

The end goal for your financial plan is for you to decide, not your financial advisor. It is not their job to tell you how to live in retirement, just to help you identify waste and get to that end goal. The amount you think you need for retirement should be carefully selected and planned for based upon your lifestyle, as well as your retirement goals. Your financial advisor cannot help you get there unless you then share these goals during the planning process.

Keep Track of Your Goals

There is no sense in setting a budget for yourself if you do not follow it, and the same goes for your financial goals. Why set them if you are not going to track your progress in meeting them? Manage your financial plan intimately and meet with your advisor for annual checkups to ensure your goals remain congruent with your current, personal situation. You might find that your goals have changed; maybe your income, debt, and family needs have changed as well. Are your investments performing up to par? You may even find it necessary to review your plan more than just once a year. Some people look at theirs quarterly.

Be sure that you maintain perspective though. As you look at your plan and goals more frequently (for example, quarterly), make sure you do not confuse your long-term goals with the short-term ups and downs of life. Take your time when making any decisions to change your plan.

Track Your Investments and Risks

One of the greatest risks your investments face is inflation. The inflation rate determines the health of an overall economy and can rapidly erode purchasing power when it increases. There are several factors that impact the inflation rate, such as higher demand for products or increases in the cost of products used to produce other consumer goods. Although you cannot control inflation, you can try to stay ahead of it.

Then there are factors like economic, political, and market risk:
• Economic risk refers to the potential for a downturn or recession in the economy that negatively impacts investments.
• Political risk occurs because of a government’s action that inadvertently sends the markets up or down.
• Market risk can occur when an entire class of assets rises or falls in value within a certain timeframe.

Allocating your assets across a diverse portfolio can help avoid or minimize the impact of market risks, but there is little you can do about economic and political risk aside from being an informed individual who pays attention to the world around them.

Understand the Tax Code

Finally, make sure you know the basic ins and outs of the tax code. A financial advisor is the best source for understanding this. You may think the IRS publications each year are a definitive guide, but the actual tax code is not discernable to the average individual as it contains tens of thousands of pages of information. Your financial advisor can help you better understand where your money is going and how it can get you the best tax breaks.

Make sure that you change your financial plan every time you see a fluctuation in expenses and salary! The plan is for you and needs to reflect you. Change is a good thing and your financial advisor will be more than happy to accommodate any of your changes, good or bad. Call us at Indian River Financial Group, for more assistance if you find yourself in new circumstances!