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You’ll never reach any goal without a plan. Your finances are no different. If you don’t proactively plan and strategize your financial life, you’ll find yourself working until you’re 90.

But making a plan is not enough. You have to regularly review your plan to make sure it’s still serving your goals.

In this episode, I discuss how to keep your financial plan profitable and on track through regular reviews. 

Show Highlights Include:

  • The Stanford rule of uncertainty and how to use it to safeguard your financial plan from ruin (3:14)
  • Why failing to regularly review your financial plan will leave you broke (3:49)
  • How to be absolutely certain your financial plan will survive the worst times of your life (7:42)
  • The right way to adjust your financial plan following a massive life change event (11:31)

To schedule your free retirement tracking meeting, specifically for first responders, head to http://pensionattention.com/ or call us at 805-409-8150.


Read Full Transcript

Welcome to Pension Attention, the best show for first responders who want to take control of their finances.

After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]

Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are. At whatever stage in your career you are in to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at ONE Fire and Police are dedicated to ensuring you take control of your finances and build the life you deserve. To find out more about me or our team at ONE Fire and Police, you can go to our website PensionAttention.com or give us a call (805) 409-8150 again (805) 409-8150. You can go to our website or give us a call, you can set your free retirement tracking meeting, take a look at where you currently are and build that overall retirement plan you're looking to build [01:13.9]

Today we're going to talk about life's randomness, especially when it comes to your financial plan and the times in our life when we should be reviewing a plan that we've already put in place. If you haven't already built that plan, something we talked about on our previous episodes, go take a look. You can go to our website, PensionAttention.com and go to the podcast page and you can listen to the first couple episodes and we discussed this. But for those of you that have either met with someone or maybe met with even us and built that plan, here's four times when I've noticed within my client base that it's a good time to review your plan. [01:45.0]

Life's randomness, isn't always bad. Sometimes we look at it as things that happen to us that can turn our world upside down, but life's randomness is also what makes it so beautiful. Let me give you an example. I was born in Torrance, California, yet my wife Veronica was born in Santa Barbara, California with over 300 million Americans walking around this great nation of ours I would suggest the probability of my wife and I ever meeting was pretty low. Put another way, the odds were very high that we never meet, that our paths would never cross. In fact, I bet there was more than a 99% probability that we'd never know each other even existed. Yet, we met, fell in love and married have two beautiful kids in spite of all the probabilities and that's the beauty of life. Now I have God to thank for that. I think he's the master of that plan and I'm so grateful for that. And the things that go on in our life, we need to adjust with, we need to move with and grow because end of the day, life is indeed filled with randomness. And sometimes random, unpredictable unforeseen events can defy the best probabilities. [02:51.0]

Randomness can baffle and deride probabilities of success, turning some worlds upside down, like I mentioned, and flying in the face of what once seemed so probable. Professor Mihai and Yaari is a distinguished economic scholar who has taught at Stanford and Yale. One of the pillars of his economic philosophy is that when making plans for the future, a person must account for uncertainty. And in my nearly 15 years of work in the financial services industry, the only way I know how to combat uncertainty and randomness is to have a strategy and a plan built and review it on a proactive basis. So we're going to talk about the four times we should be reviewing our financial plan. [03:31.3]

In building our wealth forecast for our clients, our financial plan, something we call our black book that we've provide to each of our clients, they have a tendency to become outdated the moment they're set down on paper, right? I mean, life happens immediately to all of us. So once you have a financial plan, we don't want to let it go stale. You want to review that plan often, even when things in your life don't seem hectic or eventful. In fact, I'd argue that those are the best times to sit down, give your full attention to your finances and do a thorough review. But we will talk about some specific triggers in life that can prompt us to do a review of our plan. And the first one I want to bring up is actually what I just mentioned is reviewing your plan when all is calm. What's the key to a successful financial plan? The planning, you want to develop a process, a system, and a strategy for managing your finances and achieving your goals before, or you need to make critical decisions. [04:22.1]

Author James Clear has quoted, ‘We don't rise to the level of our goals, but fall to the level of our systems.’ So building a system is the small steps that actually gets to the goal itself. So we need to build that system so that before your critical decisions get made in life, especially in finances, we have that plan in place. It doesn't do much good to experience an event and then say, you know what? We should have made a plan. So be proactive. We talked about a lot of this on The Planning podcast we did on episode one. And I want to make sure that we review this on a consistent basis. We do that with our clients, we reach out, make sure we touch base with them to review it. And I actually discuss with all my client something, I call a material change. We'll define that for each one of our clients. And we can define that for you. And if you haven't built your plan, right, then this podcast is really more around, Hey, you should probably build your plan first and then get into the discussion around how we review it. But understanding your material changes is big. You don't necessarily need to let your advisor know that you changed your cable package yesterday, if you can, if you want to, but the material changes are what are important. And it has to do with both ins and outs. [05:24.7]

And what I mean by that is if you have a promotion at work, right, you get that promotion, you get that step up in your guys' career, right or an outflow. Hey, I purchased a car; I have a $400 a month payment that may be material in nature right. Now, I'm not discounting, you know, a Netflix or Hulu or an Amazon monthly subscription of 7 or $9 something like that. We can go through that and we'll get that data as well. But we want to understand the material changes and be proactive and how those implement and change and overall plan. And when things are calm and there isn't some fire to be put out in your financial that's exactly when you want to create a financial plan to start. And then ultimately as life progresses, that's also a great time to review it on a consistent basis. And if you haven't found that advisor to do it with, I urge you to give us a call or find someone near you that you can build some trust in. You can reach us at PensionAttention.com or give us a call at (805) 409-8150. There, you can set your free 15 minute even retirement tracking discussion. Take a look at where you're at right now. And if you haven't built that plan, have that conversation with all of my advisors. I've trained them myself to be able to help first responders go from active duty to retirement and to live out their goals that they want to have in retirement. [06:34.8]

Switching gears for a second, the second item I want to bring up, but when it's a good time in life to review your plan is to review it not just when things are calm, but on the flip side of that, review it when you have questions about what to do next. Because when uncertainty arises, your financial plan can provide clarity and peace of mind. Now, presumably at this point you've committed your plan to paper in a more stable and less emotional times. Okay? So we've done that in the previous step and in the first step of actually building the plan when things are calm and you want to focus on it. So taking time to review that when things feel shaky or when they're in a heightened emotional situation can remind you of the strategic and rational course of action to keep. It kind of brings you back in a way to that time when you built the plan or where you first reviewed it, when things were stable and something in life's thrown something at you, right, that’s the best time to take a look at the plan, cause that can be your foundation, your groundwork, to remind you of the strategic and rational course of action you took when you built the plan and why the plan makes sense. And if it doesn't, that's a good time to also say, Hey, this life event that was thrown at us, right? [07:33.4]
Maybe it's a divorce or maybe it's a child being born on the positive side, right. Things that come through our lives need to be focused on and look at the plan, but going back to the plans, the foundation is a huge thing. It brings us it's settles our mind back to the emotional stage we were in when we built the plan and why the plan has its components in there to keep us on track. And then we alter it by adding the new components that life has thrown at you to show how that tracks with your goal that you have originally. And if that's goals, moved we need to find that as well. [08:01.5]

Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the drop program? go to www.pensionattention.com to find out how we can help. [08:18.0]

Outside of life events as well in our personal lives, this is especially helpful when the uncertainty rises because of financial markets, maybe they're volatile. You know, in those times like this year, for example, most people want to do something, anything to respond to the discomfort that can come from seeing your investment portfolio go for a rollercoaster ride. But if you're already setting a plan and a strategy, like the strategies and plans that we put our clients in here at ONE Fire and Police building that plan first, then aligning and designing, the asset allocation, the investment management and the investment portfolio we put in the deferred comp plan. We have that planning strategy, we stick to it. We don't let short term events, especially when it comes to your investments; shake you off your long-term course. Ideally you'll have an investment policy statement as part of your financial plan, something we do for each of our clients, which serves as a written reminder of what you committed to doing and why we're doing it. At that stage with our clients like we've been doing this year, we'll review that investment policy statement along with the plan and then follow the path as it lays it out, rather than your portfolio and deviating from our strategy based on some emotional or market fluctuations. [09:26.6]

All right the third item, which is a good time in life to review your plan, is reviewing it after finalizing major changes or transactions. The majority of our clients are in their thirties, forties, and fifties within ONE Fire and Police with regards to our active and retired members. That means we're always changing. Okay. We all do that. Human nature is we're still building in those time periods, between buying homes, maybe even starting side businesses for some of you or growing families and growing assets and wealth for the future, liking your deferred comp plan and your pension. Major life changes in big ticket transactions are the norm in a lot of clients' lives in that environment and in those ages. So each time a change occurs from a pay raise like a promotion or recently with the MOU adjustment from the city in the next three years, you're going to have increases in pay essentially twice a year, three times a year it's important to look at, those are changes, or maybe you sold a home this year. [10:23.3]

We want to out of the new numbers and financial data associated with those events and use them to update the overall financial plan. Back to my point earlier about a material change, something that we at ONE Fire and Police, my advisors and me do for our clients, right, is to define their material change, not just in general, Hey, every $9 you had, you know, to your expenses we want to know about, you can do that, but it'd be better to round out what we call what I call a material change, okay. Those experiences I mentioned right of major changes or transactions. So any time you experience a big change in your own life, whether it's professionally or personally, make sure to review your plan and keep it up to date with the accurate numbers. And this can be easier to do after the dust settles and the numbers are finalized because you don't have to guess or make assumptions you know what they are, which is different than the proactive planning we do when we're starting the planning out and why we're talking about reviewing it now. And that's why it's important to kind of keep them on track and be proactive as we get new numbers as they come in. And of course this is most effective, when you reviewed your plan before you went through a change or a big financial shift, I mean, you want to be proactive above all else. Just don't forget to circle back to your planning, confirm its accuracy when all is said and done. Anytime you have a chance to replace an assumption that we made, maybe in the starting of your planning, like how much your bonus may be throughout this year with MOUs or what you think you might net if you sold your house with a fact, something that's been finalized after the dust settles, when we have the numbers take advantage and we'll make the update. [11:49.2]

The fourth and final thing, I think is a great time life to review your plan that you put in place, is to review it at least annually on an ongoing basis. I always say a good financial plan is not a static document. It's not two dimensional it's three-dimensional, it's living, it's breathing. It's a process, okay? It's something you consistently engage with over time. And this isn't to sound like it's going to be a whole bunch of work and you always got to keep up on it. That's where you offload that work to an advisor. I spoke about this in episode two of Pension Attention with regards to why having advisor is so important. It's that accountability in that professional with experience and knowledge to help us keep it on track and when the numbers do arise and we'll instill those conversations in you, any great adviser should instill these conversations and ask the right questions to bring them up, which is what we do at ONE Fire and Police And if you haven't built that trust in an advisor, I strongly recommend you start researching those. And if you want to reach out to us, you can reach us at (805) 409-8150 or on our website at PensionAttention.com. [12:52.1]

Okay, we have all the information there and you can actually set a time to set a free retirement tracking meeting, it's 15 minutes. And it'll allow you to get an understanding of where you currently are in the deferred comp plan and where you want to go. And we can start building that plan for you and understanding how a good advisor operates with you. Those that are knowledgeable and experienced, not only in the financial services arena, but also specifically with first responders, because end of the day, you do a different job than we do in the private sector. That experience of being raised in that type of environment, along with almost 15 years of financial service experience is really what I've designed in our team at ONE Fire and Police. And that we want to make sure that we share with each one of you from our expertise and help you build that plan while you are serving our community. And when we do build that plan, we want to review it like we set on a consistent and ongoing basis, at least annually. Every time your situations change, it has the potential to throw your plan out of whack, right? Cause it's no longer accurate. It's no longer an accurate reflection of your new reality, whatever that may be, whether that's positive or negative. That's why it's critical to review your plan at least once a year, to ensure that the data you're working with is accurate. [14:00.8]

Your plan reflects your goals and your priorities. And you're clear on the action items that you need proactively manage over the next six, 12 months until the next annual review and to keep things on track. And this is a great point actually, to bring up, if you're sitting here, you haven't built that plan. So this podcast is largely dedicated, today's show right around when to review your plan, you've already built, but if you haven't built your plan and you're listening to some of these things and you're kind of going like, well, I don't have enough to kind of put together a plan. You do. I promise you, you do. Not only that the items we talked about, about proactively looking at a plan, things are still and calm. What is a good time to look at your plan, but also when things are kind of tumultuous, you should have a plan in place, right So do you want to get to it before life starts happening. Because your plan being on the job right now, if you don't have one in place, if you're deferring right now to your deferred compensation plan or you're saving it all, you have income coming in. It's a great time to build a financial plan to then review on an annual basis and to review in times when are good, like good life randomness that happens, maybe it's getting married, buying your first house, maybe having your first child. [15:06.7]

If we have a plan in place, we're then able to have a lot of other conversations around, okay, how does your investment plan change? It may or may not. How does adding insurances to your life change? Because now we have people that we need to take care of, if something, God forbid happened to you, right? That also comes into line with our pension planning. Okay? How we're focusing our pension on those kinds of conversations as well. So planning at any stage is important and I urge you, if you haven't set your plan yet, or if you're even thinking, Hey, I haven't even set my plan. I don't even know what my goals are. Let's define that. Our process outside of the 15 minute retirement tracking discussion that each of you can have for free if you go to PensionAttention.com or you can give us a call at (805) 409-8150. But after that retirement tracking discussion, we have, we'll go into what we call our discovery and in our discovery we will help you define your goals and help you ask the right questions not only to yourself maybe even of us will instill those kinds of conversations to make sure you're asking the right questions. So if you don't think, you know how to even research an advisor or what to ask a great advisor will sit with you and say, these are the things that you should be thinking about and how we get involved with clients. We do that at ONE Fire and Police, but if you're there, don't let that stop you, right? [16:18.1]

Have the conversation, spend the really small amount of time in yourself to understand, Hey, I'm deferring this certain amount, 50 bucks, a hundred bucks every two weeks or whatever, to your paycheck. And I did that a year or two ago because a captain I had at my old station told me to do so that's all great. But before life throws its randomness at you, which it will, the good and the bad, it's really a good idea to make sure that you not only have this plan and goals defined and build the strategies, not only in the investment management, but in the overall cash flow analysis and overall financial planning to make sure that you keep on track and review that plan on a consistent basis. [16:54.8]

Thank you for listening before acting on anything discussed today, remember speak with a financial advisor near you about your specific situation, or if you'd like our help, you can visit us at PensionAttention.com or give us a call (805) 409-8150. You can schedule on our website or on the phone number, a free retirement tracking review. We can take a look at where you currently are in your deferred comp plan and track that and meet the goals that you wanted to find it. If you haven't defined those, like I mentioned, we will help you define them. Next week on Pension Attention, we're going to talk about How to manage and reduce debt of any amount, I’m looking forward to it and until then stay safe. [17:36.4]

The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [17:59.6]

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