Time Won’t Necessarily Be on Your Side – How to Be Financially Prepared for Whatever Comes

Time Won’t Necessarily Be on Your Side – How to Be Financially Prepared for Whatever Comes

Time Won’t Necessarily Be on Your Side – How to Be Financially Prepared for Whatever Comes | John L. Smallwood

In our practice, it’s very common for us to find that, while many clients are financially successful, they’re not maximizing their wealth and their wealth’s potential. Everyone is working with different circumstances, which is why it’s imperative to consider all possibilities when creating a wealth management process based on your Wealth Curve. The Wealth Curve concept came about after I joined my father in business. He had already been in business for more than twenty years at that time and had seen a tremendous amount of change in the economy and markets, from hyperinflation to high-interest rates to a ten-year treasury at 15.81 percent.

In spite of all this volatility, the industry likes to make the math fairly simple: you have a certain amount of money, you have a certain amount of time to hit your goal, and there are certain assumptions on the return that you can make. There you are—happy retirement. However, that’s just not how it works. You don’t know if you have the time. Everything changes and the result is consistent pressure on your wealth. I had already been talking with clients about all this for a few years when I gave a presentation to a group of financial advisors about the concept of timeline. The conversation at that time was geared toward life insurance as part of a financial plan.

I broke the presentation down into three components from when I started in the industry and to where I was at that time. What resulted was an exponential curve. Over the life of the curve, the life insurance took on many different roles, moving from wealth accumulation into enjoyment of the wealth to passing the wealth on.

About a week after I gave the presentation, Hurricane Sandy devastated the area of New Jersey where I live. For thirteen days, we had no electricity, so the office was essentially closed. After a few days, I managed to get a generator for my home, so we had limited electricity there but not enough to power the internet all day long. With more time on my hands, I took the opportunity every morning to sit down with my daughter’s unused sketchbook and colored pens and pencils and draw out different financial simulations on a curve. I got up every morning and sat there for two or three hours just writing and thinking, writing and thinking. I literally wrote out and planne8id every financial scenario I could think of, and that became the financial pressures I’ve been talking about.

That led to the creation of the Wealth Curve concept, which became the basis for the wealth management process that we use. The process involves sitting down with you and really understanding your circumstances, pressures, and goals; putting together a plan—a blueprint, as you’ll discover; stress testing that blueprint, implementing it, and then upgrading it annually to ensure you continue to be on track with your goals.

The process works for people of any age. We’ve got clients in their nineties who update their plans every year. Just like there’s no magic investment or financial product, there’s no magic age of retirement. Very wealthy, very successful people often don’t retire. They change their job roles—they do less of what they hate doing and more of what they love to do. Bill Gates is not retired; he’s doing something that he loves and is still growing money. He still has an impact on his company.

Unfortunately, there are people who hate their jobs, and in truth, their companies won’t let them stay past a certain age. If you’re in that situation and woefully underprepared, then the next five years mean making some significant changes—that starts with changing your plan right now.

Even if you’re already retired, you can have a better outcome with a better plan. One of my really great clients referred us to his parents. They were already retired for about ten years at that time, and they had been subject to market volatility, inflation, and a lot of pressure. They had been calling their son, my client, and talking about how they were afraid they were going to run out of money. We worked with the parents and developed a plan that put some guaranteed income in place, balanced other areas, and took all the pressure away. After that, instead of all the conversations centering around the ups and downs of the market, all they talk about is the dad’s golf game.

The fact is, the traditional approach of “invest and let time do its job” – which requires too many assumptions – isn’t the approach that will provide the security and wealth growth that you want.  When you build a plan that identifies potential problems and plans for various realistic outcomes, you create a plan that does not solely lean on time to be successful. Plans based purely on assumptions are wrong—yet those are the kinds of plans so many people have.

All plans make certain assumptions: your income will continue to increase every year by a certain percentage rate, you’re going to keep saving at a healthy rate, your employer is going to put in a contribution, and taxes and fees are going to stay static. You may even assume certain rates of return and that you’re going to be able to keep working. But again, those are assumptions. The only guarantee any financial advisor can make is that everything is going to change – the question then becomes, are you prepared for those changes?


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