One of my most memorable family vacations to date is a 17-day road trip winding through the northeast states in 2018. We hauled our trailer from South Carolina, through West Virginia to New York, across to Vermont and over to Maine, then through Pennsylvania and back home again.
We made plenty of stops along the way—sometimes planned, sometimes spontaneous. But thankfully, we had a road map and GPS to help us see the big picture of our whereabouts and navigate through obstacles like construction and accidents.
In much the same way, you can think of financial planning as the map that guides you through your life’s journey.
After all, without a map, how do you know where you’re going?
Just like a road map and GPS help direct you to your destination, a financial plan similarly helps you identify your investment and savings goals and how to get there.
You could wing it, of course, but driving without any pointers will likely add extra minutes or hours to your path. In financial terms, that might translate into investing too late and losing out on the benefits of investment returns.
The result? Making it to your destination late, or falling short on your retirement savings and being stretched thin.
But the importance of having a map isn’t the only way that travel resembles your finances. Here are four other ways financial planning is like mapping out a cross-country road trip.
We all have unique starting points.
We all start at different places in life… So do our finances.
A cross-country road trip starting from Maine will look nothing like one starting in California. Similarly, our different backgrounds and upbringings equip us with different incomes, credit scores, and ideas about saving and budgeting.
You can’t copy someone else’s travel plans if you’re coming from somewhere else, or if you don’t even have an interest in where they’re going. So while some people can afford to purchase a home or car early in their lives, others can’t. It’s not fair to use another person’s life benchmarks as your own, lest you find yourself taking out a bigger loan than necessary.
The bottom line is: financial plans are personalized based on your starting point. That means they’re tailored to your income, expenses, savings, and goals—so you shouldn’t copy someone else’s plan.
Some of us tow extra baggage.
Along the same lines of starting from different points, some of us come with extra baggage. That can be good or bad—for instance, carrying spare tires versus towing an oversized load. In financial terms, that could be receiving an unexpected cash windfall or having student loan debt.
Either way, your financial plan is customized for you and your situation. Whether it’s a mortgage, inheritance, or something else, your plan accounts for these miscellaneous conditions that require more specialized directions.
For instance:
- If you’re self-employed, how will you save for retirement? What are your best health insurance options?
- If you’re dealing with loans, when can you reasonably pay them off? How much can you set aside for your debt every month?
Your finances may be complex for whatever reason, but your plan factors these details in accordingly. It may take some organization getting all your bank and credit card statements as well as your “extra baggage” together, but doing so will ultimately make your financial plan that much more comprehensive and helpful.
Wrong turns and detours will happen.
Sometimes, circumstances out of your control—like bad weather or poor road conditions—will take a toll on your route. Or, other drivers on the road might affect your plans and leave you with few or no alternatives.
Just like travel has the occasional detour or unexpected traffic, it’s also normal to need to recalibrate your financial GPS. That could be because of a car accident, health scare, or even a personal change of plans.
As a result, you’ll need to reassess your life periodically.
But having that financial plan in the first place provides a safe cushion when the unexpected happens. A GPS’s prescribed route isn’t meant to be concrete, after all, particularly for a long drive. Similarly, your financial plan should have room for flexibility. That might mean cutting back on other expenses or adjusting your goals to account for any unplanned setbacks.
Either way, rerouting isn’t the end of the world. A financial plan ultimately sets an adjustable blueprint for determining your next steps and how to achieve your goals, even in the face of major life changes.
You also need to account for other passengers.
Your vehicle’s occupancy isn’t limited to yourself. In other words, your financial plan should account for the central people in your life—your spouse, kids, and even parents or relatives you may be responsible for later on.
Granted, not everyone’s vehicle has an additional traveler or two (or more). But for those who do, you can think of your front-seat passenger as your partner. And sometimes, it’ll take both of you to successfully navigate to your destination.
This is where it might get tricky. Are you and your passenger getting along okay?
Any driver knows that disagreements in your vehicle can quickly transform a peaceful drive into an awkward or chaotic journey. So how you do communicate with your other riders?
You need to be open, honest, and willing to compromise when difficult situations arise. Financially, that could include issues like:
- How to budget day-to-day living expenses
- How to handle debt
- What your saving goals and priorities are
- When each of you wants to retire
- How to combine assets
Make your trip smoother by working with your partner as a team. Cooperating and having regular conversations about money can set your ride up to be far more pleasant in the long run.
Final Takeaways
Every vehicle on the road moves towards its own destination at its own speed. But for all of them, a road map and GPS are crucial for seeing the big picture and figuring out which turn to take next.
If you’re just getting started with financial planning, ask yourself:
- How do you manage small issues that have the potential to get bigger?
- What are your retirement goals? Specifically, when and where do you want to retire?
- Are you and your partner headed in the same direction? More importantly, are you working together?
- How do you work through disagreements with your partner?
- How do you handle issues that are out of your control?
Maybe you’ll notice that not all of these questions directly relate to your finances. Interestingly, that’s because financial planning is about more than money. It’s about preparing you to achieve all of your major personal goals across your lifetime.
So, what does your financial path look like? Is your car well on its way to its destination or is it stopped at a crossroads, looking for directions?
Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.
Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.