I’m not a big fan of spur-of-the-moment home improvement projects. You know the kind that are presented to you early Saturday morning. Perhaps it was brought to your attention about thirty minutes before you even planned to be awake (which is so awesome). The idea to build something or install something, or paint something. These are not things you do at the drop of a hat; or at least not things you do WELL at the drop of a hat. These things take planning. These things are usually more time-consuming than one initially thinks and more importantly, they lead to…MORE PROJECTS! Some of these unforeseen or additional tasks will need to be done right away to prepare for your main project. All of this can lead to accidents, added expenses, and additional time that you could have avoided if you had planned, anticipated, and taken precautions.
If you had, say, been given a little bit more time to think about this project (bitter, party of one, bitter, your table is ready), you would have been able to consider most all of the additional requirements and how to avoid the accidents and mishaps. By knowing ahead of time, you would be sure to have allotted the right amount of time to complete it, to have acquired the right tools, and you would have prepared a plan in your mind and on paper.
Financial planning is a lot like this. There are several areas of financial planning: Retirement, Education, Insurance, Estate, Investment, and Taxation. When you are addressing one area, you do so knowing that one of the other areas will affect or be affected by whatever you decide. If you make hasty decisions in one area, you may find, perhaps much later, that what you did had a negative, avoidable effect on one or more other areas. Perhaps you saved too much for education and not enough for retirement. Maybe you are saving too much for retirement and not enough for emergencies. Perhaps, you purchased enough life insurance to replace your income but not enough for your surviving spouse to save for their own retirement and put the kids through school. Just like those home projects, everything we do financially has at least some impact on another aspect of our life.
Let us also discuss tools. When I have not taken enough time to plan a home project, I often find I do not have the proper tool for a particular task. Let’s use something as seemingly simple as painting as an example. If you are painting a ceiling, you need a paint roller that has a thicker “nap”; one that will get the paint down in the grooves and bumps of the ceiling surface (I think these are called “acoustics”, but I’m a planner not a painter). Well, thanks to the impromptu nature of this project, you may only have a roller with a nap thick enough for walls, not a ceiling. Now painting the ceiling will require more applications, more work, and more time.
When you don’t plan, you end up using whatever you have on hand. You don’t give yourself enough time to research and acquire the optimal tool. In financial planning, financial products, which are the tools we use to reach a goal, are sometimes utilized for a purpose for which they are not intended. For example, some life insurance products are sold as a retirement savings vehicle. It may not be impossible to achieve a retirement goal with a life insurance product, but it also may not be the most efficient way to achieve that goal. Planning allows us to identify our goals and to find the most efficient tools to reach them.
As for home projects, I gave up several of them a while back. There are few things I can do around the house and even fewer I can do well. Sure, I like to save a little money by doing things myself, but I have learned that, considering all the things that can go wrong, the time, and the aggravation, I’m really not saving much at all. Most times, I hire a professional I trust. Someone who does what they do all day, every day. They know the most efficient way to complete the project, they know what other areas need to be considered, and they have the right tools.
I realize none of this is necessarily groundbreaking, but it is intended to inspire you to consider ALL your financial goals and to give them the attention and the necessary time it takes to plan for them.