Why Do Some Financial Plans Fail?
A common talking point when we're having our internal team meetings at Keen Wealth is that we want our clients to be confidently living their best lives. I believe that if you don't have that confidence at every stage of your life, particularly in retirement, then there's something off about your financial plan.
Often, folks who go it alone overlook some key technical factors that a professional advisor would have been able to help them address. But there's also an emotional side to financial planning that can be much more important than any number in your portfolio. Folks who don't work to understand their feelings about money might not necessarily be setting themselves up to fail. But they could be missing out on ways to optimize their plans, their money, and their lives.
On today's episode, we discuss why some financial plans fail and how working with an advisor who cares about more than just your money can help.
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7 Common Mistakes That Can Cause a Financial Plan to Fail
If your financial plan doesn't address these critical issues, please sit down with an advisor as soon as possible:
- Not having a financial plan. If you're failing to plan, you're planning to fail.
- Unrealistic expectations. A financial plan is not a winning lottery ticket you get to cash when you turn 65. There will be ups and downs between where you are now and where you want to go. Realizing a dream retirement takes hard work, commitment, and discipline.
- Overspending. The single most powerful adjustment you can make to your financial plan is controlling how much you spend. A spending plan doesn't work if you don't stick to it.
- Not preparing for volatility. In the long run, the markets usually grow and build wealth. But you have to plan for weathering short-term volatility as well, whether that means rebalancing a diversified portfolio, adjusting withdrawal rates from retirement accounts, or tapping into emergency reserves.
- Not weighing all your Social Security options. Taking Social Security before you reach full retirement age reduces the potential size of that benefit and can affect your tax bracket. But these tradeoffs could be necessary if you need extra funds to compensate for an unexpected job loss or a debilitating medical condition.
- Not making an estate plan. If you pass unexpectedly without a durable estate plan in place, your estate will be settled according to the laws of your state of residence. That process can get very messy -- and very public.
- Not having proper insurance coverage. Retirees should review their Medicare options every fall during Open Enrollment. They should also consider their individual needs when planning for things Medicare doesn't cover, such as vision, dental, hearing, and long-term care.
Managing Your Emotions
Many years ago, I was advising a couple with Matt Wilson, my podcast co-host and Keen Wealth's Chief Investment Officer and President. The husband was preparing to retire and felt really good about their plan and their assets. His wife was much more apprehensive. We explained that she and her husband had done a tremendous job of sticking to their plan, and they'd grown a nest egg that was going to keep them comfortable throughout their retirement. But hearing us say that and showing this woman her numbers didn't help ease her mind.
Finally, after a little more discussion, she shared this anecdote:
"When I was in high school, my grandmother told me that I was terrible with money, so she was never going to leave me any."
That woman had anxiety the rest of her life around the topic of money. Now here she was, in her 60s, and she still wasn't comfortable spending money. But once she'd shared that memory with Matt and me, we were able to unpack her feelings around money and talk through her plan in a more beneficial way.
I think these kinds of conversations are an example of where my team at Keen Wealth can bring e value to a financial plan. Yes, our checklist-driven process ensures that we hit all the action items I listed above. But we also have the emotional experience and expertise to understand the limits of that process.
When the markets are in flux, when your health or your employment take an unexpected turn, when you're celebrating a major milestone, or when you're preparing to face one of life's big challenges, you don't need to see spreadsheets. You need an advisor who understands both your life and your money, and who will always put your wellbeing first.
Make an appointment to meet with Keen Wealth and let's talk about what living your best life confidently means to you and how we can help you achieve that goal.
About Bill
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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