For people who undergo the financial planning process, there are usually gaps, typically at retirement when you stop earning a regular income and start spending savings and and again in old age when home care costs use up most of your savings and income.
It is important to remember that the financial plan that you agree with your advisor is a snap shot of your life today. All future expenditure and asset accumulation is projected forward using conservative assumptions. But then real life takes over. There’s birth, death, moving job, increases in taxes, stock market crash, inheritance, moving home. The list is endless. I know I certainly didn’t plan to be unemployed for a year nor had I any intention of running my own business!
Where financial planning plays an important role is in helping you identify what you need to do so that you can achieve what is important to you. You can also see the effect that major financial decisions will have on your future. But predicting expenses over the next 40/50 years is not going to be accurate, there will just be too much happening in between and a lot of it will be outside of your control.
So while the financial planning process will make you aware of shortfalls in income in the future, solutions can be worked on over time. To get the most out of financial planning, you should pick the 3 most important things to you today and work on achieving them over the next year. Next year, we readjust your plan and pick the 3 most important things to you next year.
Financial planning is an ongoing process that constantly needs adjusting over your lifetime, so even if things are perfect or there are large gaps in income, it will all change over time.
If you have any questions, contact me directly at steven@bluewaterfp.ie