By John R. Berry
No two financial planning sessions are alike, but here at Corner Post Financial Planning, we do see some themes. Below, I outline several general recommendations we give often.
Change a habit
This is common, especially before retirement. Often, clients need to save more for retirement, which should be a monthly or biweekly habit. This goes hand in hand with spending less on a consistent basis. Also a habit. The double benefit of saving more and spending less is that you will have more to retire on but will be used to living on less.
Sometimes habits need changing after retirement. This primarily concerns the need to spend less. It’s our job to warn clients if their withdrawal rates are unsustainable.
Most of the time, building and maintaining wealth requires disciplined habits.
Do something specific
Changing habits isn’t easy. This next recommendation isn’t necessarily simple, either, depending on the situation.
Frequently there are blind spots or unaddressed problems in an individual or family’s financial life. The financial planner’s job is to call those to the client’s attention and suggest action.
Common action items include:
Consider long-term care or life insurance
Secure necessary legal documents (will, power of attorney, trust)
Permanently lower expenses through one-time action (downsize home, stop supporting able-bodied adult children)
These conversations are not always comfortable, but they are our duty.
Make an adjustment
Sometimes a plan is on track with the exception of a few small but important tweaks. A key example of this is asset allocation. More than once I’ve seen young savers piling money into retirement accounts, but the funds they’ve selected are inconsistent with a long time horizon. Usually we recommend greater exposure to equities in those situations.
Such modifications aren’t meant to be permanent, though. Someone approaching retirement might need to dial down their portfolio volatility, at least for shorter-term needs.
No changes required
Yes, it happens. Some individuals and families have all their ducks in a row and we just say, “Good job.”
Hopefully this gives you a good high-level overview of common outcomes of financial planning sessions.
Note I said “session,” as a doctor might call it a “visit.” Circumstances can change year to year, so an adjustment you need to make for one year might need to be reversed down the road. That’s why we encourage clients to keep the lines of communication open and touch base with any question, concern, or altered circumstance.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Asset allocation does not ensure a profit or protect against a loss.
CERTIFIED FINANCIAL PLANNERTM John R. Berry is owner of Corner Post Financial Planning in Mineral Wells. Corner Post Financial Planning offers hourly and flat-fee financial planning services. For information about these programs, contact Beth Watson.