You’ve no doubt heard plenty about how to simplify your financial life: Sign up for direct deposits and automatic payments; use online banking and bill pay; consolidate accounts and so on. But what about your financial plan – that overarching guideline for managing your finances to reach your goals? Have you ever stopped to consider whether it’s more complex than it needs to be, whether it causes you undue anxiety or demands too much of your time and energy?
The steps below can help you address issues like those and more. In the process, you can begin assessing your financial plan and potentially identify ways to streamline and strengthen your strategies, while staying on track to meet your goals.
Review your goals
Any time you review your financial plan, the first step is typically to examine your goals. Having well-defined goals makes it easier to tailor a specific strategy and the most appropriate asset allocation for each one. Evaluate your progress toward your current goals and determine if any have changed or if you have new ones.
Review your strategies
The next step is usually reviewing the resources and tactics that are part of your financial plan. This might include different savings and investment vehicles, and the amount you put into them each month. But it’s also helpful to understand why you’re using each strategy — in other words, the purpose of each account or tactic, and how it helps you reach specific goals.
For instance, you might contribute to a 401(k) to build retirement funds. You might have other strategies to help you save for a major purchase, support philanthropic endeavors, meet a business need or build a legacy.
Watch out for accounts that seem to have no specific purpose or don’t align with one of your current goals. It’s not unusual to find these, since your goals change over time and your strategies may not always evolve in step. In addition, if someone doesn’t have well defined goals, accounts may accumulate or may have a vague or very general purpose that may not be the best approach to reaching their goals. Even an emergency fund should be well defined based on your personal comfort level and need for immediate liquidity.
Review your reactions
While it may not seem like emotions are part of financial planning, they can be. It can be useful to reflect on how you’ve felt during past market fluctuations – how did you react when the market was up and when it was down or sideways, and what actions did you take based on those feelings?
You can also consider how you feel about different strategies or about managing your overall financial plan. Are there aspects that caused you anxiety, that felt too complicated or sapped too much of your time?
By revising your financial plan, you may be able to address some of these feelings. That might mean delegating more responsibilities to a financial professional. Or it could mean winnowing down the number of accounts you need to monitor and manage. In fact, this may also help reduce expenses, make it easier to manage required minimum distributions in retirement, or ease the stress on your agents or heirs.
Revise your plan
The information from these review steps can help identify ways to adjust your financial plan so it better aligns with your goals and addresses your needs. As you make changes, though, remember that each of your accounts and strategies are one part of a greater whole. It can be helpful to consider how changing one could impact your overall plan. For example, if you want to boost contributions in one area, such as retirement, do you need to cut back somewhere else, such as in legacy building?
Also consider costs versus value of the adjustments. For instance, if you decide to pay a third party to manage your financial plan to reduce your stress levels, will the emotional benefit and other advantages gained be worth the price?
It may also be useful to involve other people in conversations around simplifying your financial plan to better align with your goals and needs. Talking to a spouse, trusted friend or professional advisor may give you new perspectives and uncover useful solutions. Your Hancock Whitney team can help.
The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.
This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.
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