How well, or poorly, you manage change is probably the most important variable in your money life. Your personal circumstances and the world around you are in a nearly constant state of flux. No matter how well your plans are laid out for the future, these plans and the aspirations behind them will inevitably change.
Of course, change can be either positive or negative. Changes in your priorities; changes in your career; changes in your health. These internal changes along with all the external changes in the world combine for a lot of change!
Financial Planning is Dynamic
Most financial plans are static documents, like a will. A will only needs to be updated occasionally because most of the estate components are known, (family members, major assets, dispositive wishes). Not so with the dynamic variables within your financial life.
Some financial plans are derived using algorithms, (math sequences), and often contain precise projections about income, expenses, savings, and net worth for years into the future. This ignores reality and provides a false sense of security about the ability to control things that aren’t possible to control.
Our financial planning process, as opposed to an unchanging financial plan, is oriented toward making adjustments as needed along the way. That’s a big reason why financial planning really can’t be executed on a one-time basis.
Making Necessary Course Corrections
I recall talking to an airline pilot on a flight a few years ago as we both were waiting for the lavatory. I asked him how often the actual flight followed the flight plan. He replied, never! Weather, other aircraft traffic, and conditions on the ground necessitated course corrections to the original plan.
Willingness to make course corrections as circumstances change creates flexibility. Flexibility is an extremely valuable attribute as you approach retirement.
Inflexibility or brittleness, on the other hand, makes your money life fragile. That’s not where you want to be, but is often the end result of following a plan that never changes.
Without recognition of change, you can easily find yourself on the road to an ever-decreasing lifestyle in retirement. That means less money for travel, perhaps moving to a more affordable house and watching your discretionary spending carefully for the remainder of your life. It’s likely not the retirement you’ve dreamed about.
The financial life you want won’t be achieved by setting a course one time and hoping for the best. Making changes when needed will put you on the right path. Start there.