Is it time to Re-evaluate your Financial Plan?

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February 14, 2022
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Re-evaluating your plan and re-evaluating your opportunities is really important. According to Northwestern's 2020 Planning and progress study, 71% of Americans feel their financial plan could use some improvement. So maybe you have a plan, but you're saying, “Maybe I can use some improvement”. At Trilogy Financial we look at the work that's been done in the past. Remember that we're not judging what was done in the past, but we'll look at that and say, is there any way that we can make improvements upon what's been done in the past to help you plan for the future. Understanding that is really important. A plan is not static, it's a living, breathing document, and you want to make sure that you're updating and reevaluating your opportunities on a regular basis.

Another thing to think about is interest rates is we don't know what's going to be in the future. I think this is an interesting one as well. Many Americans for 2020 stayed at home a lot and a lot of them spent less money. Matter of fact, Northwestern Mutual did a study for 2020 on average, people say it's about 10% more money in their personal savings than they did in 2019. Well, why didn't they spend? Some of it was lifestyle – they didn't go out to dinner as much; they didn't go on their vacations- there’s a lot of things that were held back due to all the craziness that had gone on. But there were people that spent on home improvements in other areas as well. People were spending more on their houses because they were living in their houses more. There's a lot of people that saved more or in that period. You might want to evaluate what to do with that savings. Maybe that's the first step in building out a financial plan. Maybe that's the money that should be put towards the college plan. Maybe that's the money that should be put towards lowering your debt overall. Maybe that's money that you should use to increase your path to financial independence. Re-evaluating your opportunities, your long-term financial plan.

I would highly encourage you to re-evaluate those opportunities again. At Trilogy Financial, we do that all the time. We look at current plans and make sure they make sense. Then when you have extra money that's saved, we look at is it working hard for you and is it working hard for your financial why. Maybe you're in a place where you can refinance. Saving money, and refinancing is another really good tool to help create more cash flow and help you get on that path to financial independence.

I'm big on this thing called Financial date nights. Earlier, I talked about the fact that people argue about money, financial date nights once a month, get out of the house, go do something different. I've had people do financial date drives that live in big cities – go have a cup of coffee, have dinner, whatever it is. Get out of the house and talk about your financial whys, talk about your planning, and talk about your goals. Don't argue about them. This is an opportunity for big picture, global type discussions within the couple and then work through those things. And when you need help and more clarity, that's where a financial advisor can really jump in and help you jump-start whatever is going on in your financial plan.

Another thing is to be flexible and willing to adapt. I said this earlier but good financial plans are living breathing documents. In regard to this, all of our clients at Trilogy Financial have their own portal. Inside that financial portal is their financial plan that updates on a regular basis. We can put paperwork in there or documents in there and it's something that's living and breathing. You may need to be flexible with what's going on in your world. Timeframes constantly are getting adjusted. We've had people come in and say, “You know what? I'm thinking about retiring early” or “My companies offering me an early retirement package.”, or “I have to work a little bit longer” for whatever reason. That's just something you update in the plan. College scenarios too. Some kids are deferring going to college and I don't blame them. You didn't pay for online college, and you may want the experience. If that’s the case, you’d go in a different direction. Whatever those things are, be willing, flexible, and adjustable and in communication with your spouse, your partner, or business partner.

Meet and talk with your financial advisor regularly. They should be asking you those questions and they will be updating you on the markets and current events. what I would say are the unknowns or the instability side. The other thing about having that advisor is that joyful accountability. Have an advisor, have a coach, have a financial team – they'll help you stay accountable to do what you say. They're not going to be bugging you, they're going to be reminding you of the good things that you've said during those planning discussions. They're going to be reminding you where you are and they're also going to be praising you when you're doing what you said you were going to do. And when you do that, you make great progress, and when you make great progress, then the plan progresses year after year after year.

How much closer are we to financial independence, that's the conversations that happen over time. So, take action on what you can do, be in control of your knowns, and plan for the unknowns. Again, insurance is a great thing for that. Work with your advisor on the unknown, so you have less anxiety. Be flexible and will be willing to adapt and remember the financial planning documents and plans are living, breathing documents. Life happens, life events happen, and you've got to plan for those things. If you're not working with a trust or a financial advisor investment fiduciary, look to find one that can help you build your own personal plan.

 

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By
Rebecca DeSoto, CDFA®
March 12, 2018

Each of our lives is comprised of elements that create a story. Our financial lives are no different – the elements include our bank accounts, retirement accounts, mortgages, car loans, student loans, investment accounts, stock options at work, life insurance policies, credit cards, etc. When most people think of their financial life, they think of these elements but have trouble contextualizing them in their overall financial story. All of these elements are simply tools that either help or deter us from our goals. Before analyzing the tools, it’s important to understand why you’re using them and the goals and priorities that create the story which requires them.

One way people analyze these tools is by researching investment returns. Before delving into the world of returns, think about why you are investing in the first place. Your investments should reflect your overall financial priorities. If the risk tolerance in your investment appropriately reflects the time-frame you plan on needing the money, then worrying about investment returns day-to-day can be more of a headache than it’s worth. For example, if you are 35 years old saving for retirement at 60 – you should be aggressively invested if you’re comfortable with that. Because you have 25 years before you plan on using the money, short-term fluctuations in the market shouldn’t really concern you. In fact, if the market does go down and you are still contributing to your retirement, you are technically “buying on sale” – getting more shares for the same dollar value. Contributing to your retirement in up-and-down markets is called “dollar-cost-averaging” – meaning you average out the cost/share of an investment by contributing consistently rather than trying to time the market and invest when you are “buying low”.

There are many benchmarks in the financial industry to compare your investments to and track performance. Some examples include the S&P500 and the Dow Jones Industrial Average for large-cap stocks, the Barclays US Aggregate Bond Index for bonds, and the MSCI Index for international investments. It’s important to understand how your investments are doing in relation to the overall market – it keeps you abreast of what you are investing in and prompts questions you may not ask otherwise – such as what fees you are paying, who’s helping you decide what to invest in, and how much risk you’re taking on compared to the benchmarks you’re using as a comparison. However, the benchmark you should habitually pay more attention to than any other is your particular goal with each investment and your overall goals in terms of building wealth.

Focusing on investment returns only paints half of the picture when tracking progress because it is completely out of your control. If you can confidently say your investments are well diversified and invested according to a risk-tolerance you are comfortable with, there is a much more important benchmark to track than returns. Instead of relying on your investment vehicles to do all the heavy-lifting, you should use your investment behavior as the ultimate indicator to determine if you’re making progress or need more work. What are the financial goals you have in mind? To retire by 55? To save for a second down payment on a house? To pay off your mortgage? Help your children pay for their college tuition? Protect your investments and family in case of a long-term illness? Reduce credit cards and student loans? Build emergency savings?

When you are focused on goal-based financial planning, there are a lot of benchmarks to concern yourself with other than the hype involved in investment performance. Are you saving more this year than you were last year? Did you increase your savings rate when you received a raise? Does the money you are spending appropriately reflect the values and priorities that are most important to you? Are you using extra income to increase investments and decrease liabilities? By focusing on why you’re investing in the first place and the priorities that matter to you, it’s easier to ask the right questions and monitor progress. Once you know what you’re shooting for, a Decision Coach can help you understand the appropriate tools to get there.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.

Each index is an unmanaged index which cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.

By
David McDonough
May 13, 2022

Have you ever had one of those months? The water heater stops heating, the dishwasher stops washing, and your family ends up on a first-name basis with the nurse at urgent care. Then, as you're driving to work, you see smoke coming from under your hood. Bad things happen to the best of us, and sometimes it seems like they come in waves. That's when an emergency cash fund can come in handy. One survey found that nearly 25% of Americans have no emergency savings. Another survey found that 40% of Americans said they wouldn't be able to comfortably handle an unexpected $1,000 expense.1,2

How Much Money?

How large should an emergency fund be? There is no “one-size-fits-all” answer. The ideal amount may depend on your financial situation and lifestyle. For example, if you own a home or have dependents, you may be more likely to face financial emergencies. And if a job loss affects your income, you may need emergency funds for months.

Coming Up with Cash

If saving several months of income seems unreasonable, don't despair. Start with a more modest goal, such as saving $1,000, and build your savings a bit at a time. Consider setting up automatic monthly transfers into the fund. Once your savings begin to build, you may be tempted to use the money in the account for something other than an emergency. Try to avoid that. Instead, budget and prepare separately for bigger expenses you know are coming.

Where Do I Put It?

Many people open traditional savings accounts to hold emergency funds. They typically offer modest rates of return. The Federal Deposit Insurance Corporation (FDIC) insures bank accounts for up to $250,000 per depositor, per institution, in principal and interest.3 Others turn to money market accounts or money market funds in emergencies. While money market accounts are savings accounts, money market funds are considered low-risk securities. Money market funds are not backed by any government institution, which means they can lose money. Depending on your particular goals and the amount you have saved, some combination of lower-risk investments may be your best choice.

Money held in money market funds is not insured or guaranteed by the FDIC or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund.4

Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

The only thing you can know about unexpected expenses is that they're coming. Having an emergency fund may help to alleviate stress and worry that can come with them. If you lack emergency savings now, consider taking steps to create a cushion for the future.

 

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

  1. MarketWatch.com, 2020
  2. Bankrate.com, 2021
  3. FDIC.gov, 2022
  4. Investopedia.com, 2021

 

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