Why the Sequence of Financial Planning Actions Matters

It’s not unusual for us to see clients who are anxious to skip ahead a few steps in the financial planning process. When you start the planning process, remember it’s a lifetime journey and bring your patience along.

Understanding the Process

One of the underlying reasons that many investors need financial planning in the first place can often be traced back to taking action steps out of order. Financial planning doesn’t have a fast forward button.

Putting your financial foundation into place usually means following a set of systematic action steps. It’s understandable why some investors are anxious to make investment decisions early in the process, but it’s not recommended until after you have established clear long-term goals. If you skip ahead to investing without setting goals, you’ll probably end up reacting instead of planning.

Acting vs. Reacting

Your long-term financial goals are achieved mostly by acting on your financial plan rather than reacting to events of the day. Overall, you want decisions based on your planning priorities not current events.

Personal financial planning goals, priorities, and timelines for achieving these goals are the first steps. However, before you can really focus on your goals, you need to inventory all of the important components of your financial life.

Once you have a compilation of financial assets, liabilities, and sources of income you can assess where you have strengths and weaknesses. You may find that there are parts of your financial life that are additive and others that are negative.

Developing Your Financial Plan

You and your advisor can then develop a baseline financial plan. This plan should serve as a touchstone as you make both routine and important financial decisions. Remember that this initial plan is just one step in a dynamic process. As your goals and priorities change, these adjustments should be reflected in your financial plan.

Financial planning can help you prepare for a wide variety of circumstances and challenges. There are plenty of personal situations that can change and numerous things to worry about. Properly done, financial planning can help you smooth out the rough spots in your financial life.

Of course, standing in the way of purposeful planning with sequential steps is all the other things occupying your mind. Author and consultant David Allen recently wrote, “Much of the pressure I witness going on for people is their mind is trying to do things it doesn’t do very well. Most people are thinking about how they should be thinking about what they should be thinking about. And then trying not to think about that!”

Maintaining Your Financial Plan

Perhaps one of the most impactful steps in the planning process is ongoing monitoring and portfolio re-balancing. These steps are important even when you think nothing much has changed with your situation.

For many investors, the discipline of ongoing monitoring and re-balancing is difficult. Some clients say it’s like going to the dentist for regular check-ups. Perhaps everything seems ok, but this discipline can help you uncover lurking problems. Re-setting and reaffirming your overall investment risk orientation on a regular basis is critically important for your long-term goals. Start there. Ready for a real conversation? Happy Thanksgiving!

Disclosure

Apollon Wealth Management, LLC dba J.E. Wilson (Apollon) is an investment advisor registered with the SEC. This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited. Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Investing involves risk, and while remaining invested can support long-term goals, it does not guarantee a profit or protect against losses. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website https://apollonwealthmanagement.com for other important disclosures.