When people learn that I am a financial planner, one of the most common questions I get asked is “what is a financial plan” (you can find the answer here). After explaining, I am often surprised they assume this is a one-time exercise, in the form of a printed document or binder to be stored securely and only updated when something major changes. 

Financial plans are best used as a “living document”, that are updated regularly to assess whether they are on-track or have drifted off-course and require changes.

Think of the exercise like a sailing trip

While boats, sailing and travel are common metaphors used in financial advice, it’s for good reason. There is a lot in common between these activities. For example, for both, you will need to consider questions such as:

• What destination do you want to arrive at?
  
  • How far away are you?
  • When do you want to arrive there?
  • What do you need/want to have with you upon arrival?
  • What arrangements do you need to make prior to arrival?
    
    
• What conditions should you expect to navigate through?
  
  • Are there common obstacles or events you may need to plan for?
  • Are there detours or alternate routes you want to take along the way?
  • How often do you expect/plan to adjust your course during your trip?
    
    
• What are your plans in the event of an emergency?
  
  • What type of emergencies to plan for?
  • What materials to have on hand?
  • What are your contingency plans? (delay trip, alternate destinations, etc.)
  • Can you still make it to your destination if something happens to you or a companion?
    
    
• What is the state of your vessel/transportation?
  
  • Is anything in need of repairs or maintenance?
  • Do you and your companions fully understand how it operates?
    
    • Can your companions operate it if something happens to you?
      
      
• Who are your companions?
  
  • Will people be joining/departing along the way? (new dependents, dependents becoming independent, etc.)
  • Do your companions’ visions/plans for the journey align with yours?
  • Do your companions have what they need to be successful?
    
    
• Do you have the skills and knowledge needed to complete the journey successfully?
  
  • Do you or any of your companions need to update their skills or knowledge?
  • Are there skills you need to add?
  • Is there knowledge you need to succeed or feel confident about your trip?

There may be other questions to address, but this provides a sense of what to consider.

A financial planner can help you answer these questions or direct you to the right resources for assistance. 

Nothing ever plays out exactly as planned

Even the best financial plan will not play out perfectly. Many assumptions have to be made (some examples include: inflation, investment returns, and income growth) and it is nearly impossible to get these exactly correct one year, let alone several years, into the future. 

Failing to perfectly map out the future does not take away from the importance of having a plan. As with sailing, you plot a course and adjust periodically as you naturally deviate from what you had planned (sometimes positively, sometimes negatively). This allows you to stay on track.

Course adjustments can be done at planned intervals or be event-driven, just like a financial plan. An unexpected mechanical issue in your boat could cause delays, similar to how a vehicle needing to be replaced could potentially disrupt another financial goal. 

One major concern that is often overlooked is the slow, unnoticeable drift that can happen over time from your projected results. These can result in major deviations and adjustments being needed if left unaddressed for too long. This is why updating your plan periodically, regardless of sense of urgency, is important.

Checking in with your advisor at least once per year to give them an update on changes in your life can help them to assess if (and to what extent) updating your financial plan may be required. Here’s a helpful resource from FP Canada when it comes to connecting with your advisor.

The best advice is to plan early and often. Unlike sailing, you don’t get to pick when you start your voyage: you are already at sea.