Financial Strategy – Planning Failure: Is Planning Failure?

Benjamin Franklin once said, “If you don’t plan, you plan to fail. But as you chart your financial journey, what steps should you take to help you keep moving where you want to go?

Consider these suggestions:

• Establish and quantify your objectives. Throughout your life, you will have short-term goals, like vacations abroad or home renovations, and long-term goals, the most important of which might be a comfortable retirement. You will want to identify all of your goals and assign them a “price”. Of course, it’s not always possible to know exactly how much it will cost to achieve each goal, but you can develop reasonably good estimates, revising them as needed.

• Create an investment strategy to achieve your goals. Once you know the cost of your goals, you can create the appropriate savings and investment strategies to help you achieve the amounts needed. For your retirement goal, you will likely need to make regular contributions to your IRA and 401(k) or other employer-sponsored retirement plan. But for short-term goals, you may need to explore other types of investments. However, for all your investment moves, you will need to consider your risk tolerance. You don’t want your portfolio to have such a high level of risk that you’re constantly uncomfortable with the inevitable swings in the financial markets. On the other hand, you won’t want to invest so conservatively that you jeopardize your chances of achieving the growth you need to achieve your goals.

• Control your debts. We live in an expensive world, so it is not easy to live without debt. And some debts, like your mortgage, obviously have a value. But if you can control other debts, especially those that carry high interest rates, you can eventually free up money that you can use to increase your savings and investments.

• Prepare for obstacles. No matter how carefully you follow the strategies you have created to achieve your goals, sooner or later you will encounter obstacles, or at least temporary challenges. What happens if you incur a large, unforeseen expense, such as the sudden need for a new car or a major home repair? If you’re not prepared for these costs, you may be forced to dip into your long-term investments — and each time you do, you could slow your progress toward achieving your goals. To avoid this, you should build up an emergency fund containing several months of living expenses.

• Review your strategy. When you first created your financial strategy, you may have planned to retire at a certain age. But what if you finally decide to retire earlier or later? Such a choice can have a big impact on what you need from your investment portfolio – and when. And your circumstances may change in other ways as well. That’s why it’s a good idea to periodically review your strategy to make sure it still matches your up-to-date goals.

None of us can guarantee that our carefully crafted plans will always produce the results we desire. But by taking the right steps at the right time, you can greatly improve your chances.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, SIPC member


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Don F. Davis