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Financial Planning can take the stress out of bear markets

Financial Planning can take the stress out of bear markets

July 01, 2022

So what is financial planning?

Financial planning is an ongoing process that will reduce your stress about money, support your current needs and help you build a nest egg for your long-term goals, like retirement.

At Alliance Wealth Management, we take a holistic approach to financial planning meaning we look at your entire situation and build a road map to success based on current needs and future goals.  A Financial plan is a snapshot in time but financial planning is an ongoing process that continuously builds on itself giving you the peace of mind to know at any given time that your goals are still achievable.

Whether you’re just starting the accumulation phase of your financial journey or entering the distribution phase, it is never too early or too late to know the best way to proceed with whatever phase you’re in.

What are you planning for?

Are you saving for a new home, a second home?  Is saving for your kid’s college education your priority, or making sure you have enough money in retirement to have the lifestyle you desire.  Do you plan to travel the world, or perhaps you want to leave a legacy to heirs and/or charities.  A Financial plan will build a strategy and lay out a roadmap with a level of certainty for meeting your goals, whatever those goals are, regardless of future economic conditions or short-term market volatility.

Taking the stress out of bear markets

So how can a properly structured and executed financial plan take the stress out of bear markets?  The answer is remarkably simple, it is because the plan illustrates exactly what needs to happen over time to help achieve your goals.  Once we determine how much of your disposable income can be applied to your goals over time, the rate of return we need to achieve to meet those goals and the time frame we have to work with, the path becomes quite clear.  Once the strategy is built and agreed upon, we run a Monte Carlo analysis to determine the probability of success of your plan based on thousands of iterations of both good and bad economic conditions to test how your plan holds up against these occurrences.  We can also factor in unexpected events such as medical conditions, weddings, downsizing of primary residences, assisted living scenarios and many, many more to give you best possible outlook on your future.

So if you know that if you save X dollars for Y amount of years and you earn a rate of return of R over that time frame (adjusted over time based on actual market returns) that you have a 95% - 100% probability that the lifestyle you dreamed of in retirement, or the College you want to send your kids to or myriad of other goals you wanted to plan for will become a reality.  Wouldn’t that give you confidence that no matter what short term market volatility or economic disruption happens, your future path has been planned with care!

In Conclusion

An initial comprehensive financial plan will outline a specific strategy to get you on your way to your goals or determine a distribution strategy that will help ensure you don’t run out of money in retirement taking into account important factors such as capital gains, required minimum distributions, Qualified Charitable Distributions and many others.  This plan is but one step in the planning process that continually updates and adjusts to make sure you stay on pace to ensure success.  As I stated earlier, it is never too late or too early to start planning because a properly designed distribution strategy is every bit as important as a well-executed accumulation strategy and at Alliance Wealth Management we specialize in both 

So if you’re interested in taking the stress out of market volatility, please contact our office to set up an initial consultation on what a financial plan would do for you.