Financial Planning is a Life-Long Journey

June 20, 2023

Previously published in The Bulletin, Bend, Oregon on June 6, 2023

My wife and I decided several years ago to torture our two kids by going on family road trips each year before we lose them to college, careers, and maybe a family of their own someday. We walked under the giant redwoods of northern California. We cruised the 17-Mile Drive of Monterey. We were awed by the valley of Yosemite and the Sawtooth Mountains. One of our favorite trips took us through the national parks of the Tetons, Yellowstone, and Glacier. The Going-to-the-Sun Road in Glacier National Park is one of the most scenic drives in our country and an engineering marvel. The twists and turns, the ups and downs, and the jaw-dropping views at every corner reminded me that with some things in life, it’s the journey, not the destination.

Financial planning is much the same as life – it is an ongoing process that needs to be revisited on a regular basis along the journey to help get you to your destination, i.e., retirement, college for kids/grandkids, etc. The first question that typically comes to mind with financial planning is, “How much should I contribute to my investment portfolio each month or year?” Wealth accumulation is important during your working years. As a general rule, save as much as you can for tomorrow without completely sacrificing your happiness today. Increase your savings if your income increases. Start saving early and let the power of compounding returns work for you over time. These are basic tenants to embrace early in your career and be diligent in applying them as the years go by. If you have not applied them to your financial plan yet, it’s never too late to start!

While investment management is a critical part of the plan, there are certainly others that can be just as important. Wealth enhancement, which includes mitigating taxes, should be another aspect of your plan. Coordination between the management of your investments and tax situation can lower your tax liabilities. Tax-loss harvesting, tax-efficient investments, and asset location strategies are common methods of mitigating taxes. If you are unfamiliar with these strategies, you can consider consulting with your advisors. Wealth protection, i.e., insurance, is yet another component to financial planning. Term life and whole life insurance policies are not for everyone but may be appropriate in some situations. If pursued, be aware of costs associated with any insurance policy before committing to a long-term contract. But umbrella policies tend to be cheap and applicable in many situations.

Wealth transfer and charitable giving may be other aspects of your financial plan. Maximizing the transfer of your wealth to your loved ones or to charitable organizations can be a complicated decision. Your financial advisor and an estate attorney can be valuable resources as you consider your options.

Another important aspect of financial planning is preparing for transitions. Some transitions are inherently part of the plan from the beginning, such as retirement. Others are opportunities that present themselves (selling a business earlier than expected) or unforeseen tragedies (losing a spouse), all of which will impact your plan. Transitioning to retirement can be an incredibly stressful process, but with prudent planning it doesn’t need to be. A proper evaluation of your standard of living will lead to an understanding of your spending needs (monthly bills), wants (discretionary spending on items such as travel and entertainment), and wishes (second home, boat, etc.). If you own a business, spend the time to determine its value. You may be surprised by the number, which may speed up or delay your projected retirement date. Lastly, if you oversee your family’s wealth, make sure your spouse knows where, and to whom, to turn to for help if something were to happen to you. Prepare them now so they are not forced to figure it out on their own while they are grieving.

Financial planning can have many layers, depending on your unique situation. It may sound daunting to begin or to re-visit some of the topics above, so just take one step at a time. It will come together with a little work and some help from your trusted professionals. Predicting the future is impossible, but preparing for the future is achievable for all of us. Having a plan will allow you to relax, so when the market or life’s changes and challenges are testing your resolve, you’ll have the confidence to stay on the road because you don’t want to miss the view around the next corner.