Fall is a great time to review your financial plan. If you haven’t yet created one you should.
Why is a plan important? A financial plan helps you prepare for the big events in your life. Unless you plan for it, you will not wake up one day and magically be ready for life’s events. A financial plan helps you to take the steps you need to in order to take care of you and your family.
It can be intimidating to plan out your finances. You may not be sure exactly where you want to end up or what goals you want to accomplish. Your financial plan is fluid and it can change as your goals and dreams change. The big events you need to include in your plan are retirement, purchasing a home, and paying for your children’s college education. If you prepare for these events now, you will be ready when they happen, and if the events never happen, you will be better off financially because you will be debt free with money in the bank.
Certified Financial Planners start with understanding your unique short and long-term goals. Identifying the resources to commit to each goal, such as current investments, savings, essential vs discretionary spending and retirement income creates a “probability of success” to meet those goals. Afraid of a Bear Market? For those with a high probability of success, your “loss cushion” will calculate the maximum “decline in value” your portfolio can sustain over the next 12 months while still maintaining the confidence of achieving each goal.
The loss cushion illustration above shows that if your retirement assets are 100% in stocks and we were to repeat the 2008 financial crisis this client would still have a 72% chance of attaining their goals. To some people this may be an acceptable risk. To others who may want a higher probability of success, changes need to be made to either the mix of assets or goals. This is an important conversation to have.
Another important part of the financial plan is making sure you have basic estate planning tools and the appropriate insurance in place if needed. It’s extremely important to make sure you have a Will, Power of Attorney, and Health Care Proxy. If you do, they should be reviewed every few years.
If you would like to start a conversation please call Chatham Wealth Management at (973) 635-4275 to set up an appointment. There is no charge for the initial consultation.
One of our Certified Financial Planners and a Portfolio Manager will be happy to sit down with you and discuss your specific financial situation and build you a financial plan to achieve your desired goals.