Is your financial plan still providing you with peace of mind?
Key Takeaways
Your financial plan should be more than just a math exercise or financial audit.
It should consider your values, goals, risk tolerance, your relationship with money, and how you want to help the most important people and causes in your life.
Be sure to review your plan with your advisor at least every six to twelve months.
There’s an awful lot to be worried about these days. From the elections to global conflict to climate change and lingering COVID, there’s plenty to keep you up at night. Don’t let your money be one of those things.
When people first come to see us, they often feel overwhelmed about their finances, whether they’re one year or thirty from retirement. Sometimes they have an outdated financial plan or no plan at all. Either way, they’re often apologetic about taking so long to seek help with putting a true plan together. We don’t pass judgment at Novi; we want to help. It’s never too early or too late to put a professional financial plan together. However, the earlier you get started, and consistently review it, the higher your probability of success.
How Our Planning Process Works
We use a goals-based approach to planning. Step 1 is asking new clients: “What do you want to accomplish in your life?” From the basics of determining monthly expenses in retirement, to healthcare cost expectations, to large one-time expenses that many people overlook: (replacing a car, purchasing a vacation home, funding education or a business venture for a grandchild, home renovations, or making big travel plans, etc.), we try to understand the big picture. The big picture is not only about your finances, but what matters most to you, what your lifelong relationship with money has been, and what you want it to look like going forward.
Most new clients come in expecting us to review their financial statements and ask a lot of questions about their spending and saving habits.
Instead, we spend most of the meeting asking deeper questions about what they want to accomplish in life, what their family situation is like, and what money was like for them growing up. We also ask: “How would your life change if you suddenly came into a lot of money?” and “What do you want to see happen in your life over the next five years?” Sometimes clients ask us: “What does this have to do with finance?” It turns out, a lot more than you might think.
At Novi, we’re big proponents of behavioral finance, which gets into the human/emotional aspects of money. It’s an eye-opening experience for many new clients. We ask them to think about their “future selves” – what kind of life they will be leading ideally 10, 20, or even 30 years from now -- and how they will plan for that kind of life. Are you going to travel a lot in retirement? What’s your monthly spending going to look like? Should we plan for extensive healthcare needs down the road? Do you have a brother who didn't do well with money, and you might need to help him down the road? These are things that many clients haven’t thought of and are often taken aback by our questions.
During these discussions, we also explore intentions regarding the transfer of wealth to children, prompting us to address legacy planning. As you can imagine, lots of emotions can get stirred up at these meetings, but they are usually well-received by clients, and we begin to build a bond with them.
Once the goals have been established, we start Step 2, by asking clients “What resources do you have to achieve your goals?” Here, we do a deep dive into what they’ve saved and what they can continue to save -- Social Security, pensions, 401(k)s, rental income properties, savings, etc. "Based on what we're working towards", we’ll say, “Is it feasible with what you have saved already", or "what needs to be done to make it feasible?” This could be working longer, saving more, and/or taking on more risk with your investments.
Here is when we'll show our findings, confirm that all of our data is correct, and let the client know where they stand. The meeting usually goes one of two ways. In some cases, the client learns they are in better shape than they thought. They realize they can retire now and live off their money for the rest of their lives. You can see the relief on their face when they get the news. In other cases, they realize they’re behind and need to make some important changes ASAP to their savings, spending, and planned retirement lifestyle and timetable.
To support our assumptions, we have invested in powerful software that runs thousands of different iterations of their plan to see how it will hold up under a wide variety of economic and financial market circumstances. Lastly, we review the client’s insurance policies and estate documents to make sure everything is in good order and buttoned up, aligning with their overall goals.
Once the plan has been put in place, we typically get together to review the plan every six months to a year, at least, to see if any life circumstances have changed or if anything needs to be updated.
Conclusion
At the end of the day, your financial plan should be more than just a math exercise or financial audit. It should consider your values, goals, risk tolerance, your relationship with money, and how you want to help the most important people and causes in your life. If you or someone close to you has concerns about your financial plan or retirement readiness, reach out any time. We are happy to assist. It’s all part of our holistic, comprehensive planning process.
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