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Are Financial Plans Worthless?

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Richard E. Reyes, CFP

The Financial QuarterbackT

Wealth & Business Planning Group, LLC

July 18, 2017

Now what I am about to tell you probably sounds a little strange since I am one of those advisors who talks about the importance of financial planning. Over the years I have probably done many plans for clients and I am here to tell you that many of the plans I created have many flaws in them. Even the best plan I ever created was wrong.

The problem with planning is that it is based on many assumptions about the future. We assume inflation, rates of return, your life style, whether or not you will have a job, even to the point of assuming whether you are going to be in a nursing home and when you are going to die. The biggest issue is that these factors are based on guesses which neither I nor you know whether it will happen this way or not. So, there we always be parts of the plan that are going to be wrong. However, I am here to tell you that it’s not the plan that is important but rather the process and implementation of planning that is valuable.

As I thumb through the pages of prior plans I have done, it’s funny to see we’ve figured has changed. Why? Because we don’t live out life in a 3-ring binder. Life is not static. Bad things such as death, disability, illness, job losses and divorce happen. But good things such as inheritance, bull markets, and even winning the lottery happen as well.

Let me try to explain it a little differently;

I just got back from a family vacation to California. We basically spent 9 days traveling down the cost North to South. My wife and I were somewhat meticulous in our planning as each day was planned in detail. Along the way we faced a variety of issues the most critical was the mud slide at Big Sur which caused the closure of the entire road way. Our detailed plans were way off, however, because we had made the effort to put all this information down on paper before we went it was not difficult to make course corrections along the way in order to continue on our journey. You see we knew where we were going, we just needed to sometimes take a different route. And if it wasn’t for the process we took before leaving it would have been difficult to make changes if needed.

If we embrace the fact that even the best laid plans will most often be wrong and stop our obsession over the assumptions we can focus more of our energy on the process of planning and set the course to get to your destination knowing that sometimes the course will have to change. This should also inspire us to act instead of worrying about all the things that are out of our control.

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