Stop failing your financial plan

June 18, 2019

Written by: Dennis Bielik, CFA®, FRM

“A goal without a plan is just a wish” – Antoine de Saint-Exupery.

As a Financial Planner, I like to spend a couple weekends throughout the year to look back on the year so far and soak it in. Each time I do this, I find commonalities among clients, friends, and colleagues that give me an “Ah Ha!” moment. This year has been no different.

In a normal sit down with clients, I like to break the year down into purposeful visits. I prefer to set the calendar for the year if possible and schedule both market/economic reviews and planning reviews. You may assume that the market reviews typically lead to my aforementioned “Ah Ha” moment, but the planning reviews are really the ones that opened my eyes this year. It’s not that they have been different than before, but I have finally begun to notice that a majority of investors tend to act similarly when it comes to following a plan.

My firm and I are very passionate about giving investors a plan to live by, not just to have. We don’t just give them a plan, we help them live one. As Planners we can do this, but it takes partnering with your clients and setting the right expectations to make it a reality. In most of my meetings this year, I’ve noticed that clients have drifted from their plan. This has occurred to the good and the bad. Before, I ignored it and would just update the plan to accommodate for the past year. But this year, I have begun asking the question, “why did you drift?” This question caught each client off guard. The purpose of the question is to get the honest answer so I can help them and everyone else going forward. It surprised me to learn the honest answer was that people viewed a plan as all or nothing. They saw it as either pass or fail, and at the end of the year, they either came up short of or surpassed the desired numbers. It turned into either, “I passed, and I can do this again” or “I failed, and I won’t ever be able to do this.” That mindset is detrimental to the health of any financial plan; it’s crucial to remember that your plan evolves with you.

A Financial Plan is important as a life benchmark to accomplish your goals. It isn’t a pass or fail exam, but an evolving benchmark to help you accomplish your aspirations in life. Whether you are an investor or an Advisor, a plan is extremely important. Even more important is the understanding that it is okay to drift from the plan. How many investments match their benchmark 100% of the time? Very few. Even index funds have a little bit of a drift, and that is their sole purpose. There will always be times we outperform and underperform our life benchmark because life is mostly unpredictable.

All of this is okay. If you miss your plan for the year, it is an opportunity to learn. When you beat your plan for the year, reward yourself and raise your bar! Each year is an opportunity to sit down and learn what worked and didn’t work each year. I encourage each person to do this at least twice a year. You cannot fail when you learn from your past.

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