Think through the things that are most important to you, then create a financial plan to achieve them.
You may think financial planning is about one thing: Being prepared for the future. But that leaves out a key element: Enjoying your present. In reality, a good financial plan balances a joyful, fulfilling lifestyle in the present with progress towards long-term milestones in the future, such as having enough money for retirement.
“The goal of planning isn’t to say, ‘Don't enjoy the now because of what’s coming later,’” says Tony Allen, Senior Vice President and Area Business Manager at Regions. “What we’re trying to do is to come up with a roadmap based on your personal goals and objectives, so that as you follow that path you’ll be comfortable along the way.”
Here’s how to create a roadmap for a balanced life — enjoying the short term and also feeling secure in the long-term.
Decide on a Destination
The planning process should begin with an inventory — not of your assets, but of your dreams. This is the time to identify your top priorities in life, whether it’s a short-term goal (buying a vintage sports car), a mid-term goal (paying for your grandkids’ college), or a long-term goal (retirement or a legacy philanthropic project). These goals are the various destinations on your retirement roadmap.
The key to this exercise is to approach each goal with specificity — what does success look like and what does it cost? Next, you can prioritize your various goals: a bucket-list item here, a vacation home there, a nest-egg target for retirement later on.
This list of your ambitions can be a powerful financial-planning tool as well as a means to help you focus your time and energy on the things that are most important to you.
“Often it’s very meaningful because people get a more concrete idea of what their ultimate goals and objectives are,” says Allen. “People who have just been living day to day come to the realization that these are the things that provide them joy, both now and later, and it gives them comfort and confidence to go out there and actually live their life.”
Plot a Course
You wouldn’t start a road trip without knowing whether you can afford the gas to get to your destination, and the same is true for life. To start, put your list of ambitions in context by assessing your assets and income, as well as how those assets might grow over time. Wealth advisors might use software that projects your long-term financial picture based on changes to your income and expenses, as well as market performance. This is where you can compare your list of goals with the assets you’ll have on hand to reach them.
“We have the tools to project whether you will be able to do the around-the-world vacation and still pay for your kid's tuition,” says Allen. “We’re not here to provide judgment on what those different goals are, just to help with investment strategy so you can meet them.”
It can be unpleasant to discover that the pursuit of one important goal might make another one — say, retiring at 60 — unachievable. But it’s also exceptionally useful information because it allows you to shuffle your list of goals proactively and come up with a final list that’s attainable. This is your roadmap, and while its primary value is in helping you identify and fulfill your top goals, the elimination of anxiety is a close second.
“There's peace of mind that comes from knowing you are following the roadmap,” Allen says. “You should feel comfortable. If there’s something you’re buying and you planned for it, then you know it's going to be fine. And if there’s a stock market dip, well, we will have been discussing asset allocation with you all along, so you’ll know that these are things that we know will happen, and that we plan for.”
Course Corrections and Bumps in the Road
As you follow your roadmap, you might make the occasional unplanned pit stop or wrong turn. And while your financial plan may not explicitly leave room for these changes, most wealth advisors are practiced at making the necessary adjustments to get you back on course — or point you toward a new destination altogether, if that’s what you want.
“It should be expected that there will be twists and turns; there’s no straight line to happiness, and no straight line to meeting your financial goals,” says Allen.
When you do veer off course, it’s important to check in with your advisor as quickly as possible. Sometimes these are shifts in priority, but more likely they are life events ranging from a lost job to a marriage, divorce, birth, or death in the family. These check-ins, which should also occur at a regular intervals, can be helpful when you’re considering a big purchase or lifestyle change that could affect your long-term financial projections.
For example, when one of Allen’s clients was considering a move to New York City, he asked for an updated financial projection in light of the high cost of living. Allen ran the numbers and determined that the move wouldn’t affect the plan’s viability. But when another client bought a new home before selling his old one — and then the old home lingered on the market — the client’s long-term outlook changed materially, and they reworked his financial plan.
As with every aspect of the planning process, there are no right or wrong answers. The right balance of financial priorities will look different for each person and family, and that balance may shift over the years. Yet there’s clear value for everyone in thinking through the short- and long-term life goals that are most important and crafting a plan to achieve them.
Learn more about what a Regions Wealth Advisor can do to help you craft or revise a financial plan that’s based around your priorities, both now and down the road.
