Financial Planning Goals
Your financial goals may include a long retirement, extensive travel, education funding for children or grandchildren, paying for weddings, buying a yacht or 2nd home, and/or establishing your legacy. Some of these goals may be more important than others. We discuss your goals and the priority in which you'd like to accomplish them.
In our analysis, a detailed model of your estimated cash inflows and outflows is built to span your expected lifetime. We use sophisticated planning software that is not bound by conventional chronological order. It offers tremendous flexibility. Your model may have future, higher-priority goals being funded before closer, lower-priority goals.
An example of this may be retirement vs. college funding. Let's say retirement is 15 years away and it's your top priority. College funding, while important, is a lower priority, but it's only 4 years away. In this scenario, if forced to make a decision, you would rather keep your money for retirement and have your child fund their own schooling through student loans. How do you accomplish both? And how do you know when you have enough to fund college? That's what we set out to accomplish with this exercise.
We typically split client retirement goals into 'basic retirement needs' and 'travel & leisure'. So taking our example one step further, let's say that you would like to make sure your basic retirement needs are met first. If there's money available you would like to fund college as priority #2. Finally, if you can meet both of those goals, you'd like to be able to spend more money on travel and leisure in retirement. In this scenario, the model we've built for you jumps your priorities into the future, back for college, and into the future again. That is what we mean by flexibility.
Once we’ve built the model to align with your goals and wishes, we run a sophisticated probability analysis on your present situation to project the chances of reaching your goals (i.e. you currently have a 60% probability of meeting your financial goals). We call this your ‘baseline’ scenario.
Your baseline scenario may need slight tweaking or a complete overhaul. We use various "what if" scenarios to demonstrate how different changes would likely affect your chances of success (i.e. if you do this, your probability of success increases to 70%). Examples of simple "what if" scenarios are 'what if you retired later', 'what if you saved more money', and 'what if you adopted a more aggressive portfolio'. Usually it is necessary to combine several "'what if" scenarios for an optimal solution.
It is important to create a financial plan that has a high probability of success, but it is also important that you are comfortable with it. If we're going to recommend that you save more money, you have to feel comfortable with your new cash flow. You know your situation better than anyone else, and that is why our financial goals planning is very interactive. Together we develop and experiment with different combinations of "what if" scenarios until we find the one that works best.
Life still happens chronologically, but our planning exercises provide the confidence to live it by your priorities.