The extraordinary power of planning

By Amy Masters, CFP®

It’s tax season at our offices right now. As a financial advisor, that means that I’m spending all of my days sitting down with clients to review their 2018 taxes and put a plan in place for the current year. What has surprised me this year? The number of people who have come in worried about their returns.

I’m hearing clients say things I have never heard before. “I’m prepared for the worst.” “Just tell me how bad it really is.” “I’m worried! I hope you have some good news.” It’s surprising to me because, in every case, these are people who are working with an advisor (me!), and who have a solid plan in place. When I tell them there are no surprises to be had, they are truly surprised—but happily so!

Every time I walk out of one of these ‘surprising’ meetings, I can’t help but think about the power of planning.

Unfortunately, the new tax laws have caused surprises for far too many taxpayers. People were told the new tax law would lower their taxes, so they simply expected to have a lower tax bill. But because the law introduced a higher standard deduction and did away with a number of deductions that had been in place for years, many people were withholding too little from their paychecks. The result: lots of hefty checks are being written to the IRS. And, of course, that’s what we hear in the news every day. The headlines are full of stories about taxpayers being blindsided by their tax bills and about tax preparers having to be more empathetic this year to help people handle the emotional hit of a lower-than-expected refund or, even worse, an amount due they hadn’t planned for. On the flip side (and these are the stories that don’t make the headlines!), those who did plan knew what to expect. No surprises. No fantastic headlines. They just had a plan that did its job.

That’s the power of planning. Pure and simple.

One of the biggest advantages of a comprehensive financial plan (which should always include a tax plan) is knowing what to expect. A detailed budget tells you what you can spend each month based on your income so you don’t fall into debt. A carefully planned retirement strategy tells you how much you need to save now to ensure you don’t outlive your money. An investment plan based on your goals and your tolerance for risk tells you how to invest wisely to grow and protect your assets over the long term. Once you’re retired, an income plan tells you how much you can spend so you can enjoy your ‘golden years’ without worrying about money. And, of course, a strategic tax plan tells you how to keep your taxes as low as possible—and makes sure you’re not hit with a nasty surprise come April 15.

Tax planning is the obvious culprit at the moment, but it’s certainly not the only area of financial planning where I’ve seen people suffer because they didn’t have a plan. Look no further than the stock market for much more dramatic examples! Many investors panicked in 2008 and put all their money in cash at exactly the wrong time. Some are just now reinvesting after missing out on the longest bull market in history. If they had been working with a trusted advisor and following a plan, they could have acted rather than reacted, and done much better in the long run.

There will always be headlines shouting that the next market crash is “just around the corner” or that a specific stock is “the biggest opportunity since Amazon!” So what’s an investor to do? How can you stay on track toward your goals? My advice: tune it out. Instead, make a real plan that you can stick to—regardless of what’s happening in the moment.

Here at KFG, our Investment Planning Committee follows a very detailed process. We analyze the markets at a very technical level and do the heavy research. We gather the information we need to create sustainable, long-term investment strategies and to guide our clients toward the best possible decisions. In other words, we do the homework so our clients don’t have to. As a result, I am happy to say that our clients are rarely affected by the news about the stock market. While they are focused on growing their portfolios and protecting their assets, they also understand that the market is cyclical and will, by its nature, ebb and flow over time. Even more importantly, they realize that their investments are in place for the long term as one piece of their overall financial plan. And because they have a plan, they can enjoy the freedom to focus on the more important things in life.

At KFG, we work with every client to build a plan that covers all the bases and, most importantly, is designed to save the surprises for more exciting things like birthdays and Christmas. That’s the extraordinary power of planning. I highly recommend it!