We know that as life happens, plans change. Nothing works out exactly as planned. It’s in that spirit that in our analysis and consultation process we anticipate unexpected things that could occur by considering all the different ‘what-if’ scenarios and planning for those. This is what we call our Plan B™.
The best financial planning is all centered around a simple question: “What if?” It’s all about planning for contingencies.
Some of the contingencies are out of your control:
- What if legislation passes that changes the tax rates / increases regulations / alters health care laws?
- What if the inflation rate rises?
- What if the stock market has a major correction?
- What if interest rates rise?
Other contingencies are more within your control – or at least have to do with your own individual situation:
- What if your spending rate is unsustainable?
- What if you earn a lower rate of return than expected?
- What if you live longer than planned?
- What if one spouse dies early?
- What if you lack sufficient liquidity to meet your spending needs?
We want to create a plan for you that makes conservative assumptions (like a lower than expected rate of return or slightly higher than expected tax rate) so that if there are surprises, hopefully they are good ones. There are three steps we use to put together a plan like this:
- Consider a wide range of realistic possibilities (these are the problems lurking beneath the surface)
- Diagnose the implications of those possibilities
- Come up with a plan to hedge against that risk (which can mean avoiding it, insuring against it, or minimizing its impact)
The goal is to insulate our clients against problems no one else is thinking about and they don’t even know they have. The main reason people lie awake at night worrying about stuff is fear of the unknown. That’s why we want to identify these unknowns ahead of time and consider the potential impact on a client’s plans. It doesn’t guarantee a positive outcome, but it does decrease the chances that their goals will be derailed by something unexpected.
Plan B™ is about being realistic and taking into account the unpredictable nature of life so that you are not upended by negative circumstances.