Mississippi Money: The Best-Laid Financial Plan
Years ago, I bought what would become my favorite suit. I picked out a beautiful blue fabric with a double vent and side adjusters on the pants. I was measured and fitted, and came back a few days later for a second fitting before it was complete. The wool was high quality and the fit was superb. A lot of time and effort had gone into making sure that this suit was right for me, and just putting it on gave me a confidence that I was living my best life in it.
So naturally I was devastated as I squatted down to move some furniture in the office, only to hear a loud ripping sound behind me. My favorite suit had failed me.
Like a well-fitting garment, your financial road map takes time to construct and tailor to your needs. A great financial plan should take into account not only your income and expenses, but also your desires and attitudes. Made just for you, a financial plan should last you years and allow you to live your best financial life possible.
Like my suit, even the best-laid financial plans can fail. What was once appropriate for you might not fit the same anymore as your life changes, your family grows and your financial needs evolve.
As your family grows, it is important to make sure that everyone is taken care of. Updating your will, IRA beneficiaries and term life insurance coverage is important. When purchasing term life insurance, consider how long it will be before the last beneficiary is self-sufficient, and how much money it would take before they are back on their feet.
Your investment portfolio needs to evolve with your financial timeline as well. While you have a family to support, having a taxable investment account can be a safety net for large emergencies. This account might be a little more conservative than how you may invest your retirement funds that won’t be touched for another thirty years.
Just because a financial plan has served you well in the past doesn’t mean that it is still just right for you. Unbeknownst to me, my suit was on the verge of failure the day before I decided to move a couch in the office. Reviewing your financial plan whenever your life changes is important and will make sure that it evolves with you. Even if you don’t do a full review ever year, checking in after life’s significant milestones will keep your plan working for you.