The title of this article may sound like blasphemy coming from a guy who carries the title “Certified Financial Planner®” after his name.  But it’s the way I feel.  It’s not that I don’t believe in financial planning…I most certainly do.  And I spend a large amount of my time working with my clients on their planning.  What I’m referring to is what most people envision when they think about a financial plan…a nicely bound, thick report with lots of nice looking graphs, charts and spreadsheets.  I received my Certified Financial Planner® designation in 1998 and I can count on one hand the number of these documents I have handed out to clients.

I believe that the role of a financial advisor/planner should be to help clients work toward their financial goals.  I do not believe that we should try to teach them how to read a financial plan.  I have spoken with too many people who have had a plan done for them at some point in the past, looked at it once, and then put it on the shelf where it’s now collecting dust.  But collecting dust is probably about all that it’s good for now.  And that leads to my problem with the written financial plan.

The “shelf-life” of a financial plan is about a year.  Almost before the ink is dry and the plan is in your hands, it is dated.  Too many things can change, and they can change in a hurry.  Think about a financial plan that was done in early 2008.  By early 2009 the investment landscape had changed in a dramatic way.  With most of the world markets down 30-50% in that time period, your plan would certainly look a lot different than it did just twelve months earlier.

A financial plan tries to project your life and financial situation into the future.  The only way to do that is by making some assumptions about various factors that will have an effect on your future.  Some of those factors are: investment returns; rates of inflation; your income; the amount you are saving and spending each year; your life expectancy; and the most important part of a financial plan, your personal financial goals.

Every one of those factors can change.  They can change quickly and in a big way.  Some changes are positive, some are not.  Take your income for example.  A couple of years ago I was doing some planning for a client who was recently remarried.  Both he and his new wife had decent jobs.  They made a good living and had modest financial goals as they began their new lives together.  Their plan looked pretty good.  Within a year, he was fortunate enough to be offered a new position with some significant upfront incentives and a hefty increase in salary.  All of a sudden, their old financial plan was dated…mostly because they could now afford to save more and spend more.  Some goals that they once viewed as “maybe, if everything goes perfectly” were now “we can do this.”  In their case, they wanted to travel more.

Obviously, this was a positive change.  But in today’s economic environment it’s easy to imagine how a negative change in your career could have a major effect on a long-term plan.   A loss of a job, an illness or injury, or an untimely death can all have a huge impact.

So, should we just stop working on our financial plans?  Of course not.  A good plan will help you put the building blocks in place for the life you want to live.  But it’s important to remember that just as your life, and the world around you changes, so should your plan.  I believe that a good financial advisor/planner will work with you to update your plan as you go through life’s transitions.  Every life transition we go through (e.g., getting married, having kids, educating them, buying a home, starting a business, changing jobs or retiring, caring for an aging parent, or dealing with our own end of life planning) will have a financial component.  A good planner will be there with you to navigate through the financial issues and not just give you a nice-looking report to gather dust on your shelf.