“Planning margins” continues a theme from my last post, “Planning is Not a Straight Line”. I want to elaborate on what planning margins are and the value they hold in helping you meet your financial and life goals. Specifically, how do they impact your ability to accomplish what’s important to you?
Planning margins consist of two elements; time and money. I’ll start with “time” as I feel this is more important than money. More money may arrive tomorrow through earnings or distributions from investments. However, time will not. Understanding the value of your time, and its role in planning margins, is paramount to your long-term success.
Setting aside extra time to think through all aspects of your decisions (and the rationale behind them) matters. How did things turn out? What did you learn? What lessons can be applied to other aspects of your life? If you had a “do-over” would you play it the same way? There is a lot to be learned through personal reflection on the process of your critical thinking and how you arrived at a decision. Decisions influence outcomes. So, how can you make better decisions? The answer is setting time aside to reflect on the past and then carry forward the processes that worked. Also important is you are learning from the processes that did not.
Too often it’s easier to just not think at all and simply react by going through the motions of life. This “unconscious living” is very dangerous, both to yourself and for those you care about. It takes a raised awareness to proactively think through all of your choices when planning for tomorrow. Beyond thinking, verbalizing your thought process with a significant other or coach makes a difference. It’s amazing how our brain increases engagement when we verbalize our priorities in addition to thinking about them.
This is where strong listening skills, curiosity, and the desire to help others as a financial professional pays off. This is why AI, or bots, won’t take over financial planning anytime soon. They have a role as technology continues to drive change, but computers and algorithms lack empathy, understanding, and compassion….at least for now. They are great for the transactional chores of buying, selling, and rebalancing investments. Not so great for what really matters in a financial planning relationship. That is providing you the time to think, reflect, and clarify your next strategic move as part of your broader goal plan.
We covered time, but what about the financial aspect in planning margins? Cash matters. You absolutely must have cash set aside in advance, with no objective but to be available if necessary. You may consider this a buffer fund while others may call it an “emergency fund”. I like to think of it as cash reserves. Something negative doesn’t need to happen for this cash to be valuable to you. Often, you may identify an opportunity earlier than anticipated as cash can also create possibilities.
Does it have to be cash? The answer is “no”. This can be an investment account without a job description or purpose. It may be another asset that can be easily converted to cash. Personally, I like cash. This is the “why” behind the importance of giving each of your accounts a specific role to play in your financial plan. There is a reason why updating your balance sheet is the first step in goal setting with Flowerstone Financial. Numbers don’t lie and they don’t hold emotion. Numbers just are what they are. Your balance sheet will tell you exactly where your priorities lie. Having the time to reflect on what you see and how you feel may lead to positive changes in your approach to planning.
How do you best utilize planning margins? Click the link below and start a conversation with us. We’ll ask you questions that will make you stop and think. This will provide you room to roam, both mentally and financially speaking, when creating a plan with purpose for your tomorrow. What you want may be just below the surface, and with a little nudge from us, you may be able to make it a reality.