How to Create a Flexible Financial Plan? Watch Football.

Fall happens to be one of my favorite times of the year. The heat of the summer is finally starting to subside and of course, it’s the beginning of football season. I spend many weekends taking in college and professional football and as I watch the ups and downs of America’s game it got me thinking. From a strategic and thought process, football and finance have many parallels. So, can the lessons we learn by watching a football game help us create a flexible financial plan? Let’s find out.

For this three-point sermon, I’m going to first touch on the importance of having a solid financial plan (game plan) that leaves room for flexibility. That leads to the next point which differentiates between noise (cheering fans) and trends (the opponent’s history). Then to wrap things up I’ll touch on why it’s important to be confident in your decision making (playing together as a team). With that, let’s kick things off!

Have a solid but flexible plan.
In football, the coaching staff is putting together a game plan for the team to be able to maximize each player’s strengths and capitalize on the opponent’s weaknesses. They do that by first studying and understanding the other team’s tendencies. The team then practices the plays to make their movement and reaction as natural as it can be.

The financial universe is similar in that as a financial planner, or coach if you will, we are very intentional about looking at each client as an individual. We evaluate where things are for each client and where they would like to be then we craft a plan that is tailored to them. It would be very disingenuous of us if we handed everyone the same template as they walked through the door. What we do at North Main Financial is to customize each plan to meet the needs of each client so they can depend on that solid plan in definitive ways.

Your financial plan should be solid and meaningful today and going forward however, you need to be flexible. You don’t need to be reminded that life changes and you need to be in a space that you can be flexible enough to adjust as it happens. Like football, you may have the best-laid plans but sometimes you need to adjust based on how the game is progressing. Whether you are a football coach or analyzing your financial plan, you want to be in a space where you can be flexible enough to pivot and go in a good direction if need be.

I recently attended a Carolina Panthers game and the outcome wasn’t what anyone was hoping for but from a planning standpoint, it was interesting to watch. As they got behind on the scoreboard their play-calling became very different. The Panthers went from a more run-focused game to a more pass-focused game. The same thing can be said for the financial planning space. When life happens, especially in a negative way, you need to be able to call an audible and accommodate that situation in a meaningful way via a flexible financial plan.

Ignore the noise but watch the trends.
If you’ve been watching the stock market over the last couple of months, particular to your 401K plan, investment portfolio, or retirement plan, you’ve seen a lot of up and down. We’ve seen several hundred points up and the next day several hundred points down, then it swings back again the following day. I don’t know about you, but it feels like a roller coaster to me. While I like roller coasters, I only like them to last a few minutes at the amusement park.

When we’re thinking about this it’s important to ignore the noise but watch the trends. This is primarily from a time function. The market on any given day, or perhaps over months, or weeks, can move in dramatic and unpredictable ways. Don’t look at the market and react based on one day. You need to account for the days, weeks, months, and years leading up to that point.

If you remember at the end of last year the market depreciated significantly in the fourth quarter in the course of about 45 days which was somewhat unusual. We don’t see that kind of thing very often, especially at the end of a calendar year. One of the things we were doing at North Main Financial Group is to figure out if it was noise or a trend. We then take action for each individual client based on the information we find.

In football, there is a lot of noise, especially if you take in SEC (Southeastern Conference) football. One of the things I love the most is how intense the fanbase gets for the home team and if you are in the stadium, you can feel the stadium rocking underneath you. It’s a ton of fun if you are the home team. From a visiting team’s standpoint though, they are literally in hostile territory so what do they do? Do they stick to their game plan or listen to the noise? If they focus on the noise, chances are they are going to get off their game plan and put themselves at risk for loss.

The same thing can be said in the financial universe. Are you watching the noise or paying attention to the trends and sticking to your plan? If you pay too much attention to the noise you’re going to be buying and selling every time the market goes green and red for any number of reasons. Stay focused on the trends and understanding not only what’s happening today but where we see other macro factors lining up. This helps you understand where you are and where you should be going so there is a larger possibility of having a positive outcome.

There can be foolish decisions made that cause us to get off track, just like when you’re on the football field. If you get caught up in the noise and what others are saying and you’re not listening to your coaches or your teammates, you could end up in a bad spot. In particular, the short end of the scoreboard.

When you make changes do so definitively.
When a football team makes changes to their game plan they are obviously doing so because they saw things on the field that they didn’t anticipate. Half-time of a football game is often when a team will adjust. They may have had a game plan at the beginning of the game, but the other team came at them in ways they didn’t anticipate. Half-time rolls around and they have a chance to discuss things outside the noise of the stadium and decide to tweak their game plan a little bit. The important thing is that they make these changes with certainty.

Financial planning is very similar. Sometimes you must be flexible and pivot from your original plan. But, when you make those tweaks, you must do so in a definitive way and with the same kind of conviction you had at the start of your plan. Meaning that when you make those changes you leave the other part behind and you go forward with the new plan. That may seem a little intuitive, but it doesn’t always happen in the financial universe.

When stocks are going up, we the people believe that they will continuously go up…in a straight line…forever. We may not say that out loud, but our psychology and our actions say that which is a very linear thought process. The other side of the coin is that when the market begins to go down, we think it will continue to go down…in a straight line…forever. However, over the entire history of the stock market that has never happened with any kind of sustainability. It has happened in short modules perhaps even over a couple months or years but has never done that in perpetuity. From a thought process, and we see this time and time again whether it’s through our TV screens or our conversations with our clients, people think that way and it’s very dangerous because history is being ignored.

Back to the football field. When the coach makes the decision to change, everyone on the team must be on board. They need to understand that the coach is doing it because they want to have a higher degree of success. Your financial plan is no different. If you’re going to make changes, it’s because you believe there is a higher degree of success in making those changes, but you must understand your history as well.

Understand where you’ve been and where the financial market has been. Are you just making a snap decision based on the noise? Or are you making decisions that are based upon trends? That’s a very important delineation in the financial process. When you make a change do so definitively and identify the reasons you are doing it.

On the football field, if the coach sees something that is a little out of kilter, they need to analyze why it’s happening. Is it a one-time thing, or is the opposing team coming at them in ways they didn’t anticipate? If a coach is constantly reacting to everything, then why have a game plan? The same principle applies to your financial plan. Are you making changes because of noise or trends? Are you reacting to what the market is doing that day? If you are constantly reacting to every little thing, why have a game plan?

Conclusion.
By looking at football, we can draw three main parallels to the financial planning universe. First, have a solid but flexible financial plan. Make sure your plan is definitive with solid goals but also be flexible enough to allow for the inevitable changes in life. After all, life does not run in a straight line.

Secondly, ignore the noise but watch the trends. Whether you are talking about an SEC football game or your own life, it’s easy to get caught up in the noise and get emotional. Don’t let your decisions be any more emotional than they must be. Try to stick to the facts and stick to the trends.

Lastly, when you make changes, do so definitively. Use the same conviction and good reason that you used to develop your financial plan in the first place. And be sure to count on your team of professionals – financial planner, tax advisor, family, et. al. – to help you develop the best game plan possible to suit your needs.

Interested in hearing more about how to create a flexible financial plan? You can listen to the full episode of the North Main Financial radio show on WSIC by clicking here: Football & Finance (9-14-19).

If you have questions about your financial goals or would like to talk with us further about our services, give us a call at (704) 987-1425 or visit us at www.northmainfinancial.com. If you wish to schedule an introductory meeting, we would be happy to meet with you at no cost or obligation to you.

These Blogs are provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of SagePoint Financial or Iredell Broadcasting.

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