Test "What If" Planning Scenarios

Let's get real. Life is complicated, and preparing for any type of important financial decision should be an ongoing process, not a point in time event. Whether you buy a vacation home, or retire early, what seems like a good decision today might turn out to be an unfortunate mistake tomorrow. But that doesn't mean you can't be smart and plan ahead. One of the most effective ways to do this is to test "what if" planning scenarios that include specific, actionable contingency strategies - plans for when a "what if" possibility becomes a "this is it" reality.

Consider some of life's biggest financial events: a new job, the birth of a child, a wedding, retirement, disability and/or death. Depending on your circumstances, some might be fairly predictable to plan for, others might not. How do you anticipate their combined financial impact when it's so hard to see the forest for the trees?

A financial professional can help, especially when it comes to explaining specific investment products and services options. However, the personal importance and emotional aspects of most financial decisions can be difficult to share, if not impossible to explain. All too often, advisor-client relationships are based on insufficient information and poor communication - challenges that significantly impact the outcome of financial planning decisions. How do you get around these issues?

Start off by mapping out your life, and the financial goals and events that matter most. Each of these events should be associated with a specific point in time, usually someone's age. Do your best to estimate the time and cost in today's dollars, since having a plan that's a little bit off is better than having no plan at all. Take your daughter's wedding, for example. You might expect her to get married when she's 27, although she might not actually tie the knot until she's 30. Adjusting for a few years difference is much easier than making up for a $50,000 shortfall.

Now that you have a plan, allocate the appropriate income to the expenses, savings and investments associated with your financial goals. This might mean investing in retirement, saving for college, buying an RV, or anything else that's in your sights. What you'll probably find is that your budget and plan are at odds - and your eyes are too big for your wallet. But don't give up. This is where traditional planning processes fail and interactive ones succeed.

With a customizable planning solution, you can adjust the plan to fit your budget, adjust the budget to fit your plan - or do a little bit of both. Try different "what if" scenarios that let you test how different decisions yield different outcomes, balancing today's financial needs against tomorrow's financial goals.

If you can adjust your budget to save more money, this is great. If not, look for alternate strategies to meet your goals. Can't afford to save for retirement and pay for college? What about a home equity loan to cover the costs of college? Only you really know what's right for you and your family. If some financial goals are currently unattainable, at least you see how to focus your priorities - and which ones to revisit as circumstances change.

In the end, your plan shouldn't be a disposable stack of paper, but instead a flexible, personal planning asset - one that is intuitive, inclusive and available on demand - how, when and where you want to use it.