Working Wealthy – Stress Testing Your Plan

May 12, 2020

I have written before about the value of having a financial plan. Even the simplest of plans can help with things like retirement spending and savings goals.

And you might say, “Sure I have a plan, but I threw my plan out the window in March”.

Effects of the Pandemic

The recent market volatility from the first half of the year is unprecedented. Forget about its historical context, it’s the most violent market volatility any of us have seen. And the market aside, the impact of the COVID-19 pandemic on our everyday lives and the well-being of our loved ones is priority number one for all of us.

We have been bombarded with bad news on all fronts. Whether its sheltering-in-place or simply trying to figure out how to go to the grocery store while protecting our health, we are all navigating a totally new environment.

In our home, we are trying, and likely failing, at homeschooling. With all the technology and resources we have, e-learning is a perpetual challenge for my wife and me.

Although our everyday routine has abruptly changed with Zoom calls for school and work-from-home set-up for our professions, we have noticed that our plan is being challenged.

The stress of the market volatility and overall economic slowdown is forcing everyone to lean on the assumptions of their plan to understand if it’s still realistic and worthwhile.

As Warren Buffet once said, “only when the tide goes out do you discover who’s been swimming naked.”

3 Steps to Test Your Financial Plan

Your plan is being stress tested and it’s causing anxiety and strain—you’re normal. Everyone is feeling it on some level. So, what then should you do?

1. Evaluate – reflect on your plan as it stands today and understand if all of your assumptions about how you need to live your life versus how you want to live your life.

A great example I’ve seen lately is the idea of travel. Perhaps you planned a spring break trip or international travel for the winter months—the restrictions on travel and overall global health situation have reduced that travel need to a want.

What other financial needs in your life have become a want?

2. Adjust – I’m not suggesting you go back and rewrite history. Don’t dramatically change your asset allocation or stop contributing to your portfolio or retirement savings.

But instead, be realistic about what life looks like going forward. Do you still feel compelled to buy a new car this year because you had planned for it? Or would it be better to wait another year to truly feel good about the purchase? Slight adjustments can make a big difference in your stress level.

3. Pause – a friend of mine likes to call the COVID-19 pandemic a “planetary pause”. Carbon emissions are way down, people are reconnecting with family and friends via video chats and some of us have more time on our hands than we did this time last year.

Use this pause in life to simply reflect on where you are and what you have.

We are all going through some level of stress testing these days. And it probably does not feel like a test—it’s real. Look back on your plan and take the time to evaluate how your strategy is holding up.

And, above all, stay well.

Nick Cosky, CFP® is a Wealth Manager and Owner at BDF and is responsible for educating and introducing prospective clients that are considering hiring BDF for their wealth management needs. In previous roles, Nick has served as the head of BDF’s Financial Planning Committee and has participated on the Business Owner Team and Women’s Service Team. Nick is passionate about the planning that BDF does for its clients and enjoys every aspect of the client-advisor relationship. Nick graduated from Lawrence University in Appleton, Wisconsin, with a Bachelor of Arts degree in History and English, and he is a CFP® professional.