If you enjoy long, boring car rides like I do, you may have searched out some good audio books and podcasts to listen to while you're cruising. Perhaps some of those even had to do with money and financial planning. The sheer number and volume of financial podcasts out there never ceases to amaze me.
Expert after so-called expert is "discussing" (telling) their ideas of what you should do with your money. They may offer hot stock tips, answer listener questions, or give budgeting advice, which aren't necessarily bad things. However, like your jeans size, or your taste in pizza toppings, financial advice is not "one size fits all" that can be covered in a podcast or Google search.
To give a personal example, when buying my home recently, I could have qualified for a housing corporation loan that would have resulted in more tax deductions, a low rate, and an even lower down payment. However, while this option looked great on paper (and would have sounded great in a podcast), and would be perfect for some people, when it came to my specific and unique financial situation, this option was less ideal than a conventional loan.
The same goes for all aspects of people's finances - what sounds good and works for some isn't right for everyone. My job would be extremely easy if I could just give everyone the same advice and be done, but thankfully, it doesn't really work that way. I like my job, after all.
When it comes to creating effective financial plans, many factors must be fully considered from all angles. Each aspect of a person's life must be considered individually, but furthermore, and where my job gets really fun (seriously!), is in considering how each part of a person's life affects, interacts and intertwines with every other part of that person's life (and that of a spouse, children, charities, etc.).
For example, will the education someone is working on and paying for allow them to land a new job with higher pay? Or is their salary rate more or less static? How will educational debt (if any) factor into that new salary? Some degrees simply come with bigger payoffs (financially) than others, while some education is more for enhancement and quality of life. There is value to both. We can help adjust a financial plan accordingly.
Are there certain hobbies or habits that the client has that may lead to a large expense later on down the line? Some hobbies are more expensive than others, and while we are all for interests and activities that make life more enjoyable, those things must be accounted for in a financial plan.
Taking all of the above factors into account, we also think about when the majority of a person's savings will be socked away - when will the majority of income growth occur, and how should we recommend the client budget and save?
Once we've looked over a person's situation and set realistic goals, we're done. Right? No. Here's where the second part of dynamic planning comes into play. It's not just how all the parts of your life intertwine now. It's how future goals and decisions fit in. Financial plans are fluid and ever-changing.
Buying a home? Everything changes. Getting married? Big changes. Having a new baby? Even bigger changes. Second home? New car? Dream vacation? Gift to charity? Once-in-a-lifetime job opportunity overseas? You see where I'm going. It's a giant jigsaw puzzle that has to be reworked over and over again.
Now, I know everyone knows the "golden rules" of financial planning. Save more, spend less. Participate in your employer's retirement plan. Get insurance, you might need it. Take advantage of compounding. Right? However, in meeting with people to discuss the basics of their money, I find that even when people do know and attempt to implement and follow these golden rules, they usually aren't going about it in the best way possible for them.
Save more, but where, and how? Spend less, but not so much less you hate your life and blow your budget. Invest in your work 401(k), but how much, and in what options? Find insurance, but at what coverage levels and premium? Did you find the best rate? What savings vehicle will get the most benefits from compounding?
Plus, it's just basic human nature to fall away from goals and self-discipline without a third party checking in and helping keep people accountable. That's why New Year's resolutions rarely come to fruition, and accountability groups are seemingly everywhere these days in the fitness world. It's hard to do it alone, even when you do know exactly what needs to be done.
In short, financial planning is dynamic, and it always changes. Life happens, and good or bad, our original intentions change. When these changes occur, it's good to have a plan in place to look back on (and a planner to help you) to make sure other areas of your life don't suffer.