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2020 Jazz: Financial Plans Need Flexibility

Updated: Apr 3

Want to have a good laugh? I recently took a few moments to review my personal and investing goals for 2020. That’s right—I actually set goals for things I wanted to accomplish this year. Imagine that?

Recently, I went back to the notebook where I’d written down my goals, and while I was looking over my notes, I couldn’t help but smile. You see, I typically break down my goals for the year into 90-day sprints. Thus, I have only a few goals that I focus on for each quarter. The first quarter of 2020 was sketched out with several items, and the remaining 3 quarters were completely blank.

It was like something major happened at the beginning of the year that completely flushed my 2020 vision down the drain! That’s life isn’t it? We can lay out our plans, and life can turn on a dime.​

Hold that thought…

Have you ever listened to jazz music? I can’t say that I’m anything close to a jazz expert. The one thing that I know about jazz is that it’s a musical genre that is renowned for the improvisational skills of the musicians. The musicians will often just “play” together, allowing their minds to unwind into a flow state where they go wherever the music takes them.

For a beginning musician, I can only imagine how intimidating this must be. You hone your skills practicing with notes on a page, and suddenly you’re expected to jump off the page to create on the fly. To an accomplished jazz musician, improvisation is rarely intimidating. It’s part of who they are as musicians. The seasoned players have mastered both their instrument and their emotions. All that’s left is for them to be present in the moment and create.

Ok back to 2020…

I was telling you about my goals. My page was blank, but does that mean I’ve accomplished nothing? Far from it. Like those jazz musicians, I had to go off book and adapt to the new music that 2020 was playing. There was a fair amount of triage on my end, as I re-organized my priorities for the remaining months of 2020. It wasn’t easy, and there were days that I felt my efforts were futile. But, there’s an important lesson here when it comes to investing for the future and planning our financial lives.

How does this concept apply to our financial planning journey? 

The answer is simple—there will be times that unknown circumstances hit us. We may not always be ready for them, but we want to remain flexible enough with our plan so that we can adapt in real time. Rigid, inflexible financial plans can be broken. As a financial advisor, I want our plans to be able to improvise when necessary.

Scary market events are a popular topic in our industry. When planning out investment strategy, investment advisors will often discuss the financial crisis of 2008-2009 to illustrate the downside volatility of equity markets. I think it’s safe to say that you can throw the financial crisis out the window now.

I suspect that most financial planners and advisors will move forward with the COVID-19 crisis as their example of how quickly equity markets can capsize on unsuspecting investors and their retirement accounts. I can’t blame them. The recency effect will be too strong for both advisors and clients.

The longer investors can stay invested, the more likely they will see favorable outcomes.

I believe investing is important, and for many people, equity markets are necessary to meet long-term financial goals like planning for retirement. I also believe that if we want our financial plans to be stronger and more resilient, we have to begin divorcing ourselves from the short-term whims of the market. We do this by creating financial plans that have resiliency built into them.

For example, a couple that recently stopped their full-time paycheck to begin living on social security and retirement income is much more vulnerable to market shocks during the first 7-10 years after their retirement date. This vulnerability should be discussed when building their plan, and their future investing strategy should address this fully. Awareness of this exposure doesn’t mean pure avoidance. It means we need to think through many risks when doing our retirement planning and discuss how we’ll respond if the market moves against us. How flexible is our plan? How can we adapt in the short-run?

Another example could be a younger couple that is working on their savings and investing plan, yet they don’t have adequate life insurance or emergency savings. This couple may not worry about the pain of a market shock because they realize they have time to recover, and they haven’t accumulated a large nest egg that requires investment help. Unfortunately, for this couple, a market decline would pale in comparison to losing a spouse unexpectedly. Without savings or life insurance, how could we adapt in this scenario? It would be incredibly difficult.​

There are countless other examples and scenarios. Each and every family has a unique set of values and beliefs about money. That’s what makes financial planning and sound financial advice so vital to long term financial success. We create our plans, but we have to be resilient AND flexible.

Who know what changes life will bring our way? Maybe life’s circumstances don’t change at all…perhaps YOU change. Our goal is to be ready for fact that change is inevitable. Can we be ready to improvise and play our own jazz when needed?

You bet.

We simply have to have the fundamentals down so that we are free to do that when the time comes.

PS.  Don’t have a financial plan that gives you confidence? Let’s chat.


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