Why Your Current Financial Plan Could Be Holding You Back
Understanding Financial Planning
They say "close" only counts in horseshoes and hand grenades. Close also counts in financial planning. But you must be diligent and keep planning.
The Power of Financial Tools
Today’s financial tools offer terrific detail about your financial future. You can:
- Input your current state.
- Assume future expenses, savings, and spending.
- Receive a projection of your financial future, down to the last penny, until your death.
Are Projections Accurate?
Will it be correct? Of course not! The financial projection only provides a broad estimation of the future. In fact, many planners now run Monte Carlo simulations to estimate a success rate for your plan.
Can We Rely on Simulations?
Can we rely on this? Of course not! Things change. Life happens. You may:
- Get married
- Have children
- Move out of state or out of the country.
- Get a huge bonus or get laid off.
Any of these events or life’s curveballs can ruin fancy financial simulations.
Planning for the Future
So, how can you plan for the future? The best answer is to accept that a financial plan is a snapshot of your current and future finances. It will be wrong, without a doubt.
The Solution: Regular Updates
The solution is to update your financial plan on a regular basis. You might do this:
- Annually
- Semi-annually
- Only when those curveballs come your way.
Your Thoughts
So, what do you think? What is your process for understanding your financial future? Do you have a range of realistic outcomes in mind? If so, how are they updated for life’s curveballs?