There are many people that go to their doctor when they have a health issue. The doctor will diagnose the problem and will usually write a prescription that needs to be followed in order to feel better. You can use this analogy when you approach your financial planner for a solution to your financial problems.
An experienced financial planner will prepare a plan for you to help achieve your goals. They can do this by assessing your cash flow, liability and assets as well as possible contingencies and goals. Here are a few dangers that you need to be aware of when it comes to your financial success.
Review and Implementation
This is the number one place that many financial plans fail. When the planner doesn’t follow up, this means that implementation may never have a chance to begin. You run the risk of non-implementation when you ask for the financial plan but don’t use your planner with its execution.
An in depth review of your financial plan at least once a year is a good idea. Much of financial planning is based on assumptions, so checking and reviewing the performance of your portfolio is essential.
Unfortunately, you are your own worst enemy when it comes to the success of your financial plan. You lose focus when you get stressed, peer pressure and everything else going on in your life that can take much of your attention. There are many investors that make poor investment decisions because they let their emotions get in the way of their good judgment and it becomes a major factor in denying them the ability to achieve their financial goals.
Creating a long term financial plan takes a lot of effort, however, there are instances when you can make some short term moves that could backfire and blow up in your face and cost you a lot of money. Keeping your emotions in check is very important to your financial success. The best way is to make a plan and stick to it.
Contingencies and Emergency Plans
Your real life emergencies can be a lot bigger than what you may have expected when you created your original financial
plan. An example would be that most financial plans will cover an entire family’s projected medical bills. There can be circumstances where unforeseen medical bills outweigh the provisions. You’ll want to find a good balance because too many provisions can affect your portfolio returns.
Change your Lifestyle
When you make an upgrade to your lifestyle due to a sudden shift in income, in can be really hard to return to the old lifestyle that you had lived when you income starts to dwindle. If this happens your savings could take a hit and may cause your plan to go off track. This is why it’s important to stick to your budget. If there is any major change in your cash flow for any reason, you will need to rework your strategy and make it possible to achieve your financial goals.