Where did my tax refund go? We’ve been reading and hearing about
how folks have been caught off guard by this April’s tax bill. The Tax Cuts and
Jobs Act cut taxes…right? This is true. It did for many individuals and businesses. The problem is, the withholding schedules (you know, the rates at which they withhold taxes from your paycheck each pay period) were changed,
which rarely happens. So, essentially, many “reductions” were spread out across
each paycheck throughout the year in small chunks. Sounds like many folks
missed that detail. There is nothing worse than having your expectations
crushed! In order to limit surprises, it’s imperative to understand the details. Which leads me to the next thing that gets my goat….
Financial planning is a verb, a process. It’s NOT a transaction. Throughout the course of your life, the details change. And there are a lot of them. Some's (or some family's) financial plan encompasses their entire picture including budgeting, spending and saving, debt management, taxes, cash flow needs, AND investments—all of which change through life's stages. How can anyone offer to sell you a financial product such as a mutual fund or annuity without having a dynamic financial plan in place? Think about it this way: allowing someone to manage your investments without first having a comprehensive plan is like allowing your doctor to diagnose your physical health with only your weight and temperature. Obviously, not enough information to make an informed recommendation. And speaking of experts...
Optimizing financial well-being is a team sport, not a solo gig. Given the comprehensive nature of a financial plan the process naturally incorporates expertise from various experts beyond the financial planner including your CPA, estate planning attorney, etc. By understanding your entire financial picture, and all it encompasses, it's possible for a trusted advisor to actually recommend what may be in your best interest and create an investment portfolio that everyone can feel comfortable with throughout the ups and downs. The financial plan is a centralized, living manifestation of everyone's input, including your own. I'd be weary of any of any one who wants to skip to the 99-yard line (football experts: don't judge me—there are 100 yards on the field) and just invest your money. Because nobody is an expert in everything, and it's imperative to understand multiple angles of the same issue. And, on the topic of control...
Yes, there are some things you can control when you're investing. You can and should control your expenses, the amount of stock market risk you take, and your emotions when making investment decisions. Of course, the ups and downs of the market cannot be controlled, but when you have a comprehensive financial plan and control the things you can, it's possible to actually take advantage of the things you can't control, rather than run from them.