Financial planning: Set it and don’t forget it

suthisak / stock.adobe.com

As our personal and professional lives evolve, so do our financial lives. One of the common pitfalls when it comes to financial planning is adopting the “set it and forget it” strategy, according to Seattle-based financial adviser Darby Affeldt, DVM, RICP. At the Fetch dvm360 virtual conference, Dr. Affeldt identified 2 of the major financial planning mistakes veterinarians make: failing to define their financial goals and making assumptions.

Failing to define financial goals

Many people skip the very important step of setting financial goals for themselves. “If you define your goals, then you can begin to align those goals with reality,” said Dr. Affeldt, adding that the definition of financial success varies from person to person so it’s important to recognize that your goals won’t be the same as someone else’s.

Too many people use Google to determine their financial strategy. “Google has knowledge, but it is devoid of wisdom,” Dr. Affeldt said, adding that people should be building their financial strategies around their own goals. She recommended categorizing financial goals in terms of time frame, say 1 to 5 years, 5 to 10, or 10 to 20 years, and then working with an advisor to prioritize these goals and determine whether they are sensible and achievable within the desired time frame.

“I see a lot of people investing in target date funds and, while that might be an easy ‘set it and forget it’ strategy, the challenge with these funds arises when we are closer to retirement, because they presume that everybody who is retiring that year is in the same financial situation, and that’s not true,” explained Dr. Affeldt. “One size doesn’t fit all.” Defining your goals allows you to understand where to position and allocate everything within your portfolio. Although target date funds can be useful, they need to be monitored frequently as your financial situation is subject to change.

Making assumptions

The problem with assumptions is that they lead us in the dark, Dr. Affeldt said. She addressed several assumptions people make when it comes to financial advising.

Their financial advisor is doing their job.

For a variety of reasons, not all advisors are monitoring what they have going on with every client, and sometimes they “let go of the wheel.” Dr. Affeldt recommended asking yourself: Is your advisor simply managing your assets and money, or are they building out a complex and collaborative plan with you to make sure that everything is coordinated cohesively and comprehensively? Without a holistic approach, opportunities and gaps can be and are missed, she said, and risks may be lurking.

Dr. Affeldt also cautioned that while building a relationship with your advisor is important, it is equally vital to ensure that you are educated about your own finances. Her advice? Look for an advisor who maintains and builds your relationship, cares about you, and takes time to educate you.

They don’t need a financial advisor.

DIY financial planning can be successful, but mistakes can be costly. “Hiring a trained professional to put a second set of eyes on your planning, and where and how you are—or aren’t—investing, is invaluable. The market isn’t the only place where we have assets; a financial advisor can assist with risk management, cash flow, tax-planning and estate planning, and investment and retirement planning.

There is plenty of time to find an advisor.

“Owning or working in a veterinary practice while raising a family and balancing a very busy life means wearing many hats, and often financial planning is put on the back burner to attend to later,” Dr. Affeldt said. But if the coronavirus pandemic has taught us anything, said, it’s that the unexpected can and will happen. Life has a way of delivering surprises, and there are too many things that could go wrong to risk put off planning. “We need time, discipline and consistency to reach financial success, and there are roadblocks all along the way which must be navigated,” she said.