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About six weeks after we returned from India for the wedding of our son and his wife in early February 2020, Ohio shut down businesses and schools to slow the spread of Covid, and our planned wedding reception for all our friends and family in the U.S. had to be cancelled and moved to the summer.  Then it was cancelled a second, third and fourth time, until we were finally able to hold a much smaller celebration this past Labor Day weekend.

Covid and all its complications have forced us to adjust to changes in our plans whether we wanted to or not.  And while it has been very difficult, it has also illustrated how important emotional and financial flexibility are in our lives.

As planners, we help people decide what is most important to them through our discovery process, and then build out the steps needed to allow them to spend more time doing what they want to do with the people and things that matter most to them.  While it sounds straightforward, it usually involves trade-offs, because none of us have unlimited wealth or lifetimes.  And things beyond our control force us to adjust as well.

People who retired just as we headed into the financial crisis and recession in 2007 – 2009 had to review their spending plans while retirees planning extended travel in 2020 had to delay trips they were really looking forward to.  Changes like these aren’t ideal, but they’re easier to handle if we have the right emotional and financial foundations in place.  While I’m not qualified to give advice on emotional flexibility, working with people for so many years has given me the opportunity to see first-hand what happy, financially flexible people have in common.

They Have an Emergency Back-up

It’s difficult to stomach low interest rates on money market funds whether you hold them in an on-line account, at your local credit union/bank or inside your investment portfolio, but an emergency savings reserve gives you the ability to handle unexpected changes in your income, or cover surprise expenses like major appliances that die when you least expect it (like our icemaker over Labor Day weekend) not to mention the ability to sleep without worry.  And when we’re not prepared for the unexpected, it can cause a cascade of new problems that amplify stress: a higher credit card balance, a reduced FICO score, or being forced to sell stocks in your portfolio to create cash at a bad time.

We can help you evaluate savings alternatives and determine what the right amount of savings is for you, which vehicle is best for your needs and how to get a reserve established.

They Don’t Live on the Edge

I once had an executive tell me it took a minimum of $50,000 a month to maintain his family’s lifestyle.  While this might not be difficult to generate for some, in his case he was constantly stressed over making his next bonus target, worrying about what would happen if he didn’t, and scrambling to meet his payments on multiple homes and country club memberships.  From an outsider’s perspective, he appeared to have it all, but it was at the expense of his own mental health.  While we would never recommend our clients sacrifice all their enjoyment today in exchange for more security in the future, not having a large, fixed financial burden to overcome each month gives you more flexibility to meet unexpected changes – and based on my observations leads to a much more relaxing life.

Once we’ve discussed and prioritized the things that are most important to you, we can help you dial in on those goals that will give you the most emotional return, and help you eliminate expenses that add to your financial stress without a corresponding emotional payoff.  If you want to self-help your way to better targeted spending and more security, YNAB is a great resource.

They Understand Planning is Process

Years ago, financial planners were famous for giving their clients impressive looking, bound copies of their financial plans.  But shortly after they were printed, they were obsolete because all the assumptions that went into the plan had changed.  As the speed of change in our lives increases, this is even more true, which is why we emphasize that planning is a process that keeps you on a path moving forward to your goals – not something that can be precision engineered – and check-ins and updates allow us to adjust to whatever new challenges and opportunities arise and keep you on track.

The proposed tax changes that the House Ways and Means Committee released last week are an excellent example of changes and the flexibility needed to face them.  We know what is being proposed, but there is little certainty around what will become law and when it will go into effect.  Here at TAAG we work to stay current on the discussions and filter out those changes that will have little impact on you and your situation, while letting you know what adjustments you may want to make in your plans either this year or the next.

Given world events, the ability to remain flexible will continue to be important to our financial success.  Consider all of us at TAAG your resource to help you prepare for all the changes that are bound to come your way.