A Financial Plan entails a holistic look at your entire financial picture and empowers you to align your personal values, priorities, and goals with your financial resources.
This includes assessing the probability that you will achieve your goals and any risks you may face in order to make good financial decisions and take action to create the life you want today and in the future.
Two important Planner Plus features; The Detailed Budgeter and the Assumptions Tab, can support you in these goals.
The PlannerPlus Must Spend budget allows you to identify essential expenses such as housing, food, utilities, transportation and healthcare. These expenses are pretty much non-negotiable and you'll want to ensure that these are fully funded in your plan.
The Like to Spend budget allows you to differentiate your non-essential expenses. You may wish to include these expenses in your plan, but can be flexible as circumstances change. Your non essential expenses might include:
Wants: items and experiences you feel would enhance your lifestyle and are likely within your reach. While you may be accustomed to these expenses in your current lifestyle, you are willing to be flexible in these areas if your financial situation changes.
Wishes: or purchases and experiences that seem like a stretch. You’d love to attain them, but might not purchase them if they negatively impact your financial situation. Or, they may entail trade offs you’re not willing to make relative to optimizing your plan.
Please see this video for a demonstration.
Intentionality and flexibility around your expenses can help you stay on track towards your goals as well as allow you change course under adverse circumstances. If you’re out of work for a period of time, the market has lower returns than expected, or you experience a large surprise expense, you’ll know where to dial back.
Creating an expense framework will allow you to identify ways you can exert flexibility in your spending. If stressful circumstances arise you’ll be prepared to take action instead of having to make on-the-spot decisions.
Once you have done the work of creating the Detailed Budgeter, you can view your plan through a variety of lenses. Pairing your Must Spend budget with your Pessimistic view can help you ensure that your essential expenses are always funded. And pairing your Like to Spend budget with your Pessimistic view can provide important insight into wants and wishes that may not be attainable or areas where you can exert flexibility under adverse conditions.
A common retirement plan framework entails ensuring that your essential expenses are funded with secure, or guaranteed income from sources such as Social Security, pensions, and annuities. The Must Spend and Like to Spend Budgeter can help you set the stage for this type of assessment.
