A comprehensive and regularly monitored financial plan is the most important component to ensure financial security. Investments are important, and cash-flow and budgeting are critical, but these are really just inputs into the plan which will give you the long view. The value of a financial plan lies in the long term vision, and crisis preparation coupled with achieving your goals, especially surrounding the plane.
A great financial plan is holistic, if it only considers part of your financial life, it leaves the rest in question, and may be disconnected and conflicting with other plans you have. A comprehensive, integrated plan including the acquisition, operation, maintenance and finally disposition of an aircraft ensures all aspects of your financial world are integrated.
Listening
Your financial planning relationship should start with the planner listening to your challenges, your plans, and your dreams. If you’re here, then aviation is a key part of your life.
Stages of life — one size does not fit all
Its important that the financial planning that you do addresses all stages of your life. And your different. You have a capital-intensive passion with costly operating expenditures to be planned for. Your passion may be coupled into your family including college costs, home costs, planning for retirement and so forth. So, be sure that the planning you do encompasses all these components, as they change over your lifetime. And remember, your aviation life of PIC time will slowly wind down, so your appreciated asset will pay you back when you finally decide to sell it. Or, if you are lucky to have a child to hand your stead down to, perhaps they will inherit your passion, literally and figuratively. Get a plan for that, the taxation issues and wealth issues can become a thing.
Early Stages of life – Building towards the plane
When building wealth — perhaps with children in the picture, hoping for a plane, saving for a home, a plane, and college — the flow of money is critical. Learning how to save for your aircraft purchase, how to invest and understanding how to manage expenses, dominate this phase of your life. Be sure to seek financial planning and management expertise to help you address these challenging times.
Care and Feeding of your Aircraft
You bought the plane! That’s the easy part, now comes the ownership, the pride and the costs associated. Unlike your car, where you can choose to defer some maintenance items, with a plane, doing that can put your life in danger. If you have a $5,000 bill to replace a prop governor, or to repair a gear actuator, you can’t blink. It must be repaired. Or, when your annual bill was anticipated to be $4,000 and comes in at $10,000 because they found spar corrosion that needed to be addressed, you must dig into the wallet. Building a plan, with a reserve is the best way to assure that you can keep your passion, and you alive.
Approaching Retirement
As you near retirement, it’s about preserving your wealth, for your life — assuring you can maintain your style of living, and fly until you hang up the headsets. Advanced planning tools ensure the best plan for you and your family.
Hanging Up the Headsets
The day will come when you know it’s time to give up your PIC. Having an exit strategy will be important and building that into the plan from the start will give a more realistic lifetime plan.
Developing your plan
The process of developing your plan can be truly eye opening. You will discover things that you have seen before, you will learn more about yourself, your dreams, your goals, and those of your significant other also. It is truly eye opening.
Engage
The first step should be to learn about each other, you, and the planner. You need to develop trust begin to understand each other. Working with someone that understands your passion will be critical. When you’re ready to move forward, you agree on the tasks together and start the period of enlightenment.
Gather Data
This is an intense and rewarding process. It will be filled with discovery and deeper understanding of your status and your goals. You will discover information about your financial situation that you might not have ever considered or understood. You’ll consider your goals, needs, desires, and tradeoffs.
Analyze
In this phase, the planner will review your data. The information will find its way into models and differing scenarios will be developed. Questions may surface along the way as the scenarios evolve.
Develop
Now the full plan begins to take shape. There may be questions from your planner along the way, and they will meet to review drafts of the plan and make adjustments.
Plan Presentation
Finally, the plan is ready to be presented. There may be presentations in person or online. There could be iterations as implications and discussions occur with your planner. Ultimately you will settle on a plan that makes sense.
Plan Implementation
Once the plan is agreed, implementation is begun. Savings rates, aircraft financing perhaps, Investment decisions, changes in day-to-day ways of managing your money, all may come from the plan.
Monitoring the Plan
Your financial life is like an IFR flight plan. You spend time developing your best plan, considering fuel, winds, weather, weight & balance and file your route. You get in, fire up, get ATIS and ask for your clearance. Then your full route clearance is announced and into the back seat goes your plan as ATC tells you what it really plans for you.
Its not that you are going to get to a different place (probably), but how you get there will evolve. As you go forward, weather may pop up so you need to request a deviation. You adapt, you evolve, but you get safely to your destination.
Your financial plan works like that. It requires monitoring and adapting. Sometimes every 2 years, sometimes more or less.
Be sure you work with a planner that will monitor your plan to ensure its tracking, and you can detect changes that need to be made. A plan that sits on the shelf and is never revisited is useless. At least once a year, discuss updates to your plan, and more often if a significant life event occurs.
If you would like to speak to a financial advisor about your aircraft ownership dreams, schedule your free consultation.