Planning provides us with direction. Plan’s help us to gain momentum and ensure that we are using our resources in the most beneficial ways. Having a plan does not mean that we know exactly what will happen. Most of us know that things rarely go exactly as planned. Instead, a plan gives us a starting point from which we can adjust and pivot as we seek our goals.
Plans Don’t Always Go Smoothly
Last April, when my family had spring break, we didn’t have the capacity for any grand trips. But, we thought it would be nice to get away from the city for a bit so we went over to Lake Cushman on the Kitsap Peninsula (in Washington State) for a few days.
I never expect warmth in western Washington in April, but was hoping for dry and 50s. Instead, we got snow and 30s.
The bike that we carted along with was never even unpacked. Hiking did not sound fun or even safe.
We were relegated to staying inside and playing many rounds of go fish and mousetrap. Not what we had planned for!
On day two of our trip a break in the precipitation, along with a tip from a local store owner, had us making a short drive to Rocky Brook Falls. The falls were breathtaking and the rain forest never disappoints. Near the falls is a beautiful rhododendron garden with the tallest rhodies I’ve ever seen.
This day trip was not in our plans – we didn’t even know the spots existed beforehand. But it turned into a delightful and memorable outing.
Some aspects of our planning did work out. We got away from the city and enjoyed the sights and sounds of nature. My child got to sleep in a bunk bed (not at the top of my list but very exciting for him.) We spent time together as a family without the usual competing priorities of home interfering.
In other ways we had to adjust our plans. We were sorry not to go bike riding or beach combing. But modifications allowed us to enjoy our trip even when unexpected circumstances arose.
Planning for Economic Uncertainty
Creating a financial plan is very similar. A financial plan is not a document etched into stone. Nobody’s plan ever turns out exactly as projected.
For starters, we cannot predict future economic conditions. We don’t know what the inflation rate will be in the future. Investment returns can be forecast but never foreknown. In the US. today two of the fastest growing expenses are healthcare and education. Will these costs continue to grow rapidly? Will healthcare and education eventually reach a point in which market demand necessitates slower growth? Can l legislative actions change the trajectory – student debt reform or single payer health care?
Unknown Life Events
In addition to societal economic predictions, there are limits to what we can envision in our own lives. Will we get a promotion? Lose a job? Some may suffer a health challenge, causing them to retire sooner than expected. Parents cannot foresee the exact needs of their children. An unexpected relocation may occur.
There are endless possibilities for our future and each will impact our finances.
Providing Direction Not Absolutes
You may wonder, “then why even bother with a financial plan?”
The purpose of a financial plan is not to chart the exact course of your financial life. That is not possible. Rather, a financial plan helps people to make sure they are heading in the right direction.
When crafting a financial plan, individual(s) make guesses and assumptions about their future circumstances and desires. These assumptions will need to be continuously revised as time passes. Goals are likely to change as we experience more of life. We will likely need to correct our course.
A financial plan can also help us to figure out where we are trying to go. Life is complicated and often busy. It is easy to keep moving without thinking about where we are headed. Our goals may change, but generally our values are pretty consistent. Values can guide us when planning for our financial future. Having a plan may prevent the need to make a complete 180 degree turn. Small adjustments to stay on track much much easier than life changing overhauls.
Not everyone needs a financial planner or a professional financial plan. Not everyone can afford a financial plan. But everyone has the ability to think about their financial future and whether their current actions are in alignment with their principles. Whether you are going it alone, or working with a professional, having a plan for your money can help you to achieve your goals.