Financial Planning: The Good, The Bad, And The Ugly

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Have-a-Plan.gifWhy is it so important to have a financial plan? For some goals, such as retirement, we don’t get a second chance to prepare. Life is always going to throw us curve balls, but if we have a plan, we can better navigate through uncertainty and challenges.

When thinking about financial planning, we generally consider two life stages: the accumulation phase and the distribution phase. Within those stages, there are people who have, or don’t have, a financial plan.

Life Phase

You Have a Plan

You Don’t Have a Plan

Accumulation

You’re accumulating investments for a goal, such as retirement

1. Good

3. Bad

Distribution

You’re spending from investments for a goal, such as retirement

2. Good

4. Ugly

 

Consider the following scenarios:

  1. You’re in the accumulation phase of life, and you have a plan. Although you’re not bulletproof, setbacks don’t cause you to panic. Chances are, your planning is geared for the long run, and you have realistic expectations about what it takes to achieve your goals. Good

  2. You’re in the distribution phase of life, and you have a plan. Although poor market returns early in retirement can knock years from your nest egg, you anticipated the pitfalls, and you’re not too worried. You may have set aside a couple of year’s worth of safe money to ride out the bad market years, or maybe you planned on delaying retirement or working part-time. Good
  3. You’re in the accumulation phase of life, and you don’t have a plan. You are rightfully worried since without a plan, you can feel lost and directionless. Furthermore, all the talking heads are confusing and potentially leading you to costly mistakes. As the saying goes, if you don’t know where you’re going, any road will get you there. Bad

  4. You’re in the distribution phase of life, and you don’t have a plan. This is where things can go from bad to worse. At this point in life, time is not your friend; you just don’t have enough years to recover from mistakes. Taking money out of your investments for retirement expenses is like taking a road trip through the desert with a leaking gas tank. Ugly

Key Takeaway: April is National Financial Capability Month – a great time to start planning. Start by visiting www.usaa.com/myfinancialscore.

 

Financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License #0E36312), a registered investment advisor and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.

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