Ditch The “Set-It and Forget-It” Mentality for Your Finances

Bear with me, this overused comparison actually works. Taking care of your vehicle is a great analogy for taking care of your finances.

It would be far easier if you could buy a car off the lot, get in, drive, and never worry about it again. We all know that is not the case. On a daily or weekly basis, you’ll need gas. On a regular basis, you’ll need oil changes, new wipers, new tires, regular maintenance, and, ultimately, costly replacement parts. If you neglect these needs, you’ll eventually wind up stranded on the side of the road.

When it comes to your financial health, there are far too many parallels to ignore.

  • Your income requirements change across the phases of your life – maybe it’s paying for college, maybe it’s retirement, maybe it’s unforeseen medical costs.
  • Markets are volatile. Trends change. Tax regulations constantly shift the advantages of investment strategies and vehicles.
  • Perhaps you come into financial resources you did not anticipate receiving – a raise, an inheritance, a severance, a business sale.
  • Major life events have major impacts on your financial health and are rarely planned – the birth of a child (maybe more than anticipated), divorce, loss of employment, loss of a loved one, a disability.

The list goes on. Ignoring any of these needs can leave you financially strained or stranded.

The most important consideration here is that your circumstances are ever-changing and, with them, so should your plan of action.

  • Getting an evaluation of your projected retirement income is a good exercise. If you only do it once, the data will likely be irrelevant in a few years.
  • Getting a set of recommendations on how to invest your 401k is a wise choice, but changes in the market may leave you with an inefficient investment strategy.
  • We are all pleased to receive additional financial resources, but how can they be best used to meet your goals and aspirations? Or can you now amend those goals for even greater financial freedom?
  • Major life events can result in the full spectrum of human emotion, but also have significant financial consequences. All the aforementioned events typically require lifestyle changes for those involved, but how will they afford it and how will it affect the likelihood of accomplishing the goals they had previously?

I do not pose these questions to bring about fear or anxiety; only to stress the importance of disciplined and ongoing evaluation of your financial circumstances. The best way to stay ahead of these questions is to implement a plan addressing each of them and assessing that plan on both a regular and event-driven basis. I don’t mean, for example, that you and your spouse go ahead and divide up the assets in case things go poorly – not at all. You should be aware that changes require action and that you should not stand idly by as changes happen.

As a financial planner and advisor, I am biased. But your greatest resource is going to be someone with the expertise to address these concepts professionally. A good financial planner and/or advisor will help you to remain disciplined in executing your savings plan, staying up to date on changing regulation, monitoring and adjusting your investments as markets dictate, and providing meaningful guidance in  financial ventures in your life.

Whether you heed the advice of working with a professional or whether you choose to go it alone, my most critical message is this: In a world of one-step solutions and quick-fixes, take a different approach to managing your finances. Don’t be the person who never changed the oil in that new car. Be the one who’s selling it as a mint condition classic 40 years down the road.