The Opportunity in Change: How Changing Goals Change Financial Plans

During the pandemic, my family moved into a new house. We weren’t planning on moving, but that didn’t stop us from participating in the pandemic housing boom.

But we did so at a time where the kids weren’t yet out of school, so for about three weeks, we owned two homes. Instead of having to take out home equity or get a bridge loan, we were able to put a down payment on the second home and be OK for those three weeks.

This is why it’s important to have a well-stocked account that can be used as either your emergency fund or your opportunity fund. It can give you flexibility to change your goals when you want to.

The pandemic caused many of us to change our goals, whether to pursue a job that made us happier or provided more flexibility, or to purchase a different home. It also forced people to change or rearrange their goals, especially if they were stricken with COVID-19 and had a mountain of medical debt to deal with.

Putting together your financial plan isn’t a one-and-done event – your plan evolves as you and your goals evolve. The plan you put together when you first engaged with your financial advisor shouldn’t be the same plan you have today.

The purpose of this article is to help you explore the types of goals you have, how they interplay with each other and how you can work with your advisor to shift your plan when your goals change.

Different Types of Goals

The right time to explore whether you need to adjust your plan is when you’ve made changes to your short-term, mid-term or long-term goals.

Short-term goals are those that you hope to achieve in the next 18 months or so, and can include establishing or building an emergency or opportunity fund. They could also include paying off debt, like credit card or student loan debt.

Mid-term goals are goals you want to accomplish in the next two to 10 years, including buying a new house, paying for a child’s bar or bat mitzvah or quinceañera, or starting to pay for your child’s college education.

Long-term goals are those that are more than 10 years out, and include saving enough money for your retirement. If your kids are younger, this can also be paying for their college education or maybe even their weddings.

An example of how shifting one type of goal will cause a ripple effect for others is deciding to purchase a sporty luxury car in the short term. If you do this, you might have to reduce your expenses or other types of costs for those middle-term goals.

What Causes Shifts and How to Plan

There are a myriad of life changes and events that could cause you to shift your goals and your financial plan – marriage and divorce, changing jobs, a drastic shift in income, new additions to the family, a death in your family, becoming a caregiver for your parents, children going to college or getting married.

When is the ideal time to identify changes in your goals? As humans, we naturally want to implement new changes during certain periods, like now in the New Year, or for milestone birthdays like 30, 40 or 50.

And while you ultimately want to get guidance from your advisor, you can make the most of your time with them by sitting down now and figuring out your budget for the upcoming year.

In the new year, I like to take my budget from last year and update it with expenses I know are coming. For example, that house we moved into? It needs a paint job and a new roof. I know that I have to plan for those expenses this upcoming year. I also look at how much vacation I took the previous year and figure out if I want to take more this year, what that might cost and what I might need to shift to make that happen.

Also, if you can plan for medical bills, this is the time to factor them in. I know my family tends to reach our deductible every year, so I plan for that. And if you know you need surgery this upcoming year, include that expense.

Factor all these foreseeable expenses in, and your advisor will help you iron out the details.

Of course, we can’t plan for everything, as much as we want to. There are always events that come out of nowhere – a disaster hits, or a family member suddenly becomes very ill or gets into a car accident. I’ve also seen many clients alter their goals and plans due to changes in their adult children’s lives. For example, an adult child gets divorced, or they need to help with their children.

But unexpected changes aren’t all bad – say you’re on vacation at your favorite spot and you see a little house for sale. You figure you go there every year, so why not buy it?

This goes back to having a fund for emergencies or opportunities. When something unexpected happens – good or bad – you have the flexibility in your planning such that you don’t have to worry.

Contact Your Advisor

Even if you don’t have an emergency or opportunity fund set up, you can work with an advisor to help get you there.

Your advisor can also help you navigate the planning opportunities that come with changing goals. For example, if you shifted jobs recently, your advisor can help evaluate whether you should roll over your 401(k) or which insurance plan would be right for you. Also, if you moved states during the pandemic, your advisor can help you figure out how the new state’s tax laws will impact you.

It’s important to trust your financial advisor and to know that they’re there to help you. They’re not there to judge your goals, but to help you achieve them.

Your financial advisor can help you assess those goals and identify specific changes you’ll need to make in your financial plan to help achieve them. Get in touch with your advisor if your goals have changed or you anticipate them changing soon.

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