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With Financial Planning, Heed the Downside — But Enjoy the Upside

Personal Finance
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By Brian McCann

Learn more about Brian on NerdWallet’s Ask an Advisor

The idea of talking with a financial advisor makes many people feel the same way they feel about a trip to the dentist: not thrilled. After all, financial planning requires that we think through and talk about how to deal with scary or unpleasant circumstances.

But good financial planning isn’t just about downside protection. It’s also about planning so people can do the exciting and meaningful things that make life wonderful.

Downside protection

As a fiduciary, I have a responsibility to help my clients understand, monitor and protect against financial downside in their lives. Some of the things I might address with clients include:

  • How to handle a bear market. What would you do if your portfolio declines 20% or 30%?
  • What would happen if one partner loses his or her job? How would you deal with the repercussions?
  • What if one partner falls ill or becomes incapacitated?
  • What would happen if someone sues you?

We talk about issues like this before we start discussing estate planning considerations, which are pretty much all related to death and taxes. It’s no wonder that people dread these conversations.

Helping people achieve their goals

But financial planning is really about ensuring that people have the financial resources to achieve their goals. In my view, this is an inherently optimistic process. As a planner, I’m here to help clients reach their goals, whatever they may be. We spend lots of time talking about hopes, dreams and values.

Just as it is my duty to address the downside potential in my clients’ lives, my objective is to help my clients achieve the upside in life, too. With proper financial planning, I have seen people do incredible things. Clients frequently:

  • Go back to school, switch careers and pursue their dream jobs
  • Start a family
  • Start a business
  • Take a sabbatical
  • Buy a home — or a second home
  • Travel the world
  • Send their children to college
  • Care for relatives

Remember the upside

These accomplishments are often overshadowed by the scary or difficult subjects people must think about when it comes to finances. Yet in my practice, the majority of the changes to families’ financial plans come from positive developments rather than negative ones. So, yes, we must protect against the downside, but let’s not forget we’re planning so we may enjoy the upside.

It’s important to talk about the positive accomplishments that people achieve with financial planning rather than dwell only on the risks and downside. Maybe this will help people stop thinking about financial planning like a trip to the dentist and start seeing it more like a trip to the gym — it’s challenging yet enjoyable while you’re there, and when you’re done, you feel great.

Brian McCann, CFP, is a financial advisor and the founder of Bootstrap Capital LLC in San Jose, Calif.

This article also appears on Nasdaq.


Image via iStock.