If you scheduled lunch with a friend five years in advance, what are the odds you’d be able to keep that date? A lot can happen over even much shorter periods of time to disrupt that plan: The restaurant burns down. You need a tooth pulled that day. Your friend is no longer your friend. You’re on a second honeymoon in Tahiti.
The same is true when you make a financial plan. That’s why at Beacon Wealth Management we distinguish between financial plans and, as our name suggests… wealth management. The former is a projection of an outcome based on a set of assumptions made at a single point in time.
A financial plan might project a specific amount of money you have at age 65. But guess what? Going through the exercise of making the projection may be a useful exercise–and we will create a plan for you–but I can guarantee you the actual number will turn out to be something different. But that’s OK.
A Dynamic Process
The point is this: Wealth management is a dynamic process. It’s ongoing. The list of possible changes in your circumstances is endless, but a few possible examples–both fortuitous and not-so-lucky–illustrate why wealth management is not a “one-and-done” exercise. Starting with the negative:
- You become disabled and have to retire early.
- You incur substantial unanticipated expenses associated with the care of elderly parents.
- An expected inheritance doesn’t materialize.
And on the positive:
- Two of your three children get full ride scholarships to college.
- Your spouse makes a personally rewarding career change to a more lucrative field.
- Your investment portfolio outperforms your original conservative expectations.
Half of the battle with wealth management is helping you to adjust to changing circumstances–good and bad ones. Although it’s easier and more fun provide ideas and guidance to people who experience a windfall, the opposite scenario is also rewarding. That’s because we often are able to find solutions that allow our clients to adapt to a new financial reality that isn’t nearly as painful as they expected.
For example, many of our clients have more wealth tied up in real estate than they realize, and don’t think about the possibilities for redeploying some of those assets. An underutilized and expensive-to-maintain second home can be sold, and the proceeds can finance decades’ 20 years worth of vacations in rental properties, with funds left over for supporting retirement living expenses.
Or a primary residence in a township with sky-high property taxes might be exchanged for as nice a home in the adjacent town where property tax rates are half as much, due to a more vibrant retail sector that contributes to the township’s tax base.
The list goes on. And remember, if a review of your financial circumstances suggests the need to make some adjustments to fulfill your goals and dreams, the sooner you make them, the easier it will be. If that financial plan in your desk drawer is more than a year old, it’s time to give it a fresh look.
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