Static Financial Planning:

Fixed Assumptions: Relies on unchanging assumptions regarding income, expenses, growth rates, and other variables.

Set Timeframe: Designed for specific periods (e.g., annual budgets) without regular updates.

Lack of Flexibility: Does not adapt to changing circumstances, such as market shifts or economic changes.

Static Financial Planning is an Easier Process: Easier to develop, relying on established data with minimal revisions.

Limited Scenario Analysis: Often lacks thorough scenario analysis, potentially unprepared for unexpected events.

Dynamic Financial Planning:

Adaptive Approach: Involves continuous adjustments based on changing circumstances and new information.

Ongoing Monitoring: Includes regular reviews and updates to reflect current conditions.

Flexibility: Accommodates different scenarios, aiding preparation for potential risks and opportunities.

Complex Process: Requires in-depth analysis of variables and potential impacts.

Enhanced Scenario Analysis: Utilizes various modeling scenarios to better understand financial outcomes.

Conclusion:

Static financial planning is rigid, focusing on fixed assumptions with limited flexibility. Dynamic financial planning is adaptive, allowing ongoing adjustments that are responsive to changes. It's more suitable for complex financial situations or volatile environments. This distinction is crucial, particularly for tax planning and ROTH conversions.  Your finances, investments, and life aren’t static; your financial plan shouldn’t be either.  If you would like to learn more about this, give us a call at 256-417-4870 or 813-522-4455

Mike

Mike Mickels is the President and Chief Compliance Officer of CochranMickels Retirement Specialists, LLC and an avid sporting clay competitor. CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement. CochranMickels Retirement Specialists, LLC is a registered investment adviser. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where CochranMickels Retirement Specialists, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. As a registered investment advisory firm, we are restricted from posting, publishing or otherwise disclosing any form of testimonial which is related to our investment advisory services. Links to websites and other resources operated by third parties are provided as information only, and there can be no assurance as to its accuracy, suitability or completeness. CochranMickels Retirement Specialists, LLC does not endorse, authorize or sponsor the content or its respective sponsors and is in no way responsible for third party content, services, products or information, or for the collection or use of information regarding the web site’s users and/or members.