How Do You Know if Your Financial Plan is Working for You?

An effective financial strategy can help reduce stress in your life. But the question is I hear most often is, “How can I tell when my financial plan is working?”

Here are some preliminary questions you can ask yourself to help you assess how your financial strategy is working for you.

  1. Will my plan work in a strong and weak economy? Will it allow me to have financial resources in the face of changing economic or life circumstances?

A lot of financial plans are not plans at all. They are a collection of products that are called a “plan.”  A case in point:  your 401K plan is not a retirement “plan,” it’s really just a collection of mutual funds. Of course, it’s important to have money set aside for retirement and a 401K is the most common retirement vehicle.

But a collection of mutual funds alone will not likely provide you with the financial flexibility, liquidity and control you need to manage a major stock market correction, a sustained economic downturn or the loss of your job.

  1. Does it allow me to have fun? Can I support my favorite charities, splurge from time to time, travel, and enjoy life?

Enjoying LifePeople tend to think they’ll have to live a life of restriction if they start to develop a financial plan. But really, your financial strategy should allow you to have fun in your life.

You want to make sure you have enough money to pay for those activities and values you hold dear, whether it’s travel, car racing or supporting your favorite charity.

3. Is your money growing, yet protected from loss?

You work hard to make your money.

Why lose any of it? With all the financial products and tools available today, there’s absolutely no need to expose yourself any more risk than you feel is necessary. If you choose, you can both grow your money and protect it from loss.

  1. Do you feel confident that you understand how your income, tax liability and expenses will be coordinated to optimize your retirement?

TaxesTaxes and fees erode your wealth. I encounter a lot of people who are paying excess income tax in their retirement.

Why? Because they did not plan on how to optimize their income from qualified plans and Social Security. With more income and fewer deductions they pay more than their fair share of tax.

5. Do you know what you’re doing and why?

Financial products can be very complicated.  I study financial contracts and financial markets for a living so my clients don’t have to get into that level of detail.

But you do need to understand the components of your financial strategy and how all the parts work together. Seek out someone you feel comfortable asking the same question to twice or even three times.

  1. Can you sleep at night?

If it’s 3 am and you are awake, staring at the ceiling because you are worried about some aspect of your financial life, clearly your financial strategy is not working for you. Clock

An effective, well understood financial plan creates financial flexibility and growth, safety, access to cash, protection and, most importantly, peace of mind.