Over the years, I have generally thought that so-called “Financial Planning Tools” were mostly sales gimmicks to entice people to move their Financial Planning needs to the Front Burner. There used to be a term: “GIGO” (Garbage In, Garbage Out). To me, that was what Financial Planning Tools were all about. Too much reliance on numbers, perhaps just picked out of the air.
In essence, these tools advised people to determine, let’s say, how much money they will need in Retirement and, then, you work backwards from there, deciding how much to contribute. Well, can you afford to contribute that amount, what about unforeseen emergencies, Growth of Family, etc? Remember that we don’t live in a Perfect World.
That’s truly putting the Cart before the Horse. If you are used to earning $100M in Family Income, you will not want it to go much lower. But: will you still have a Home Mortgage; Drive your car as much; have Kids in College, etc? So, perhaps your Cash Needs will drop more than you might think.
The linked Inter-Active Tool, from the NY Times on March 23 2011, http://www.nytimes.com/interactive/2011/03/24/your-money/finance-checklist.html?ref=economy, to me seems to make sense. Rather than merely making-up numbers, it’s focus is more of a question check-list for the various stages of your life. Things to think about in your Planning.
Keep in mind also, that in many cases (i.e. First Child, Divorce, Retirement, etc.), it might be the first time that you encountered it. In some circumstances, such as saving for a Child’s Education or Retirement, starting early is perhaps the best idea. For most other’s, taking a detailed inventory of your Assets and Liabilities and speaking with Friends or Relatives who have been through it, might also make you more aware of possibilities. Having competent Legal Advice is important, say for a Divorce or Estate Plan; but, keep in mind that attorneys often focus more on Legal Matters rather than have a realistic understanding of the people involved.