A Plan, a Map, a Vehicle, and Fuel

Summer vacation season is upon us. With that in mind, let’s discuss successful traveling and the implications for your financial planning. Fuel is a material used to produce power. A Vehicle is an object used for transporting something from one place to another. A Map is a diagrammatic representation of an area showing features within it. A Plan is a detailed proposal for achieving something. As you can see from my simple definition exercise, a plan is not a map, a map is not a vehicle, and a vehicle is not fuel. In reverse order, fuel goes into a vehicle; the vehicle follows a map, and a map provides the diagram for the plan. A map is not a plan. A plan includes elements of time, people, and added resources.

This simple explanation is only meant to point out that often words are used interchangeably without much thought. If you are driving to Myrtle Beach for the 10th year in a row, or back to Chicago to visit family again, this is not a big deal. However, if you are traveling somewhere for the very first time, or the only time, clarifying these terms may be the best thing you do. I find people can make this mistake when they are dealing with their finances.

When it comes to your financial planning, you are making decisions with each of these elements throughout time. Here is how you might consider each of these variables as we reach summer travel time.

Fuel

Your fuel is your earnings. This is the material that produces financial energy for you.

Are you up for a review this year at work and can you influence an impactful raise or bonus? Labor in many parts of the economy is tightening. Use this to your advantage if you can show value to your employer.

Did you receive a tax refund over $1,000 last year? Do you know how the new tax laws will affect your taxes for 2018? You can adjust your withholdings and have more in your take-home pay during the year. Use this fuel for your benefit now instead of letting the government use it!

Are your earnings building up in cash accounts that pay too low of a yield? Cash is very important for the right reasons. Keeping too much cash can be wasteful. You can put cash to work to create more power for your needs.

Vehicle

Your vehicle, or vehicles, are the modes of transportation that you put your fuel in.

Yields are finally, albeit slowly, rising on cash-based accounts. Can you improve your performance even slightly to help yourself? Do a mid-year check on your investment portfolio. After substantial gains in 2017, and a significant uptick in market volatility with muted returns in 2018, a check-up is likely in order even if the outcome leads to no changes.

Map

In the last month, I have had two clients who have wanted to look at adjusting their retirement picture. One was due to a health issue, and one was due to career reflection. So, they wanted to look at a new map. Earlier this year, a client’s child received a scholarship that will alter their college funding needs significantly. This can change their map, too.

Do you have a map laid out on your table for your financial goals? Going back to the vacation analogy, if you just “head south,” you could end up anywhere from Arizona to Florida. Believe me; you wouldn’t want to have that amount of variability in your financial planning. You would waste your fuel and likely would have followed someone else’s map!

Plan

A plan is not a map. A plan figures out how best to use your fuel by putting it in the most appropriate vehicles for you, personally, to travel on your map in the most effective and efficient way. Your plan will lay out the following:

• What is your time frame for your goals?
• What is the dollar amount needed to fund your goals?
• What is the impact of an inflation assumption on your goals?
• What is a necessary annual savings amount each year?
• What is an appropriate projected investment growth rate to be used?
• What other factors should be considered?
• What is our probability for success, and how do we limit the risk of uncertainty?

Warren Buffet was mentored by an icon of finance named Benjamin Graham. Mr. Graham famously said, “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”

Why do people seek financial counsel from me? To follow Graham’s wisdom.

Author: David Jeter, CFP^® | Partner and Financial Advisor | Allegheny Financial Group | June 2018

Allegheny Financial Group is a Registered Investment Advisor. Securities offered through Allegheny Investments, LTD, a registered Broker/Dealer. Member FINRA/SIPC.