Maryland Bar Bulletin
Publications : Bar Bulletin : August 2005

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That's Enough
~How much is "enough" for your financial future?~
By Jason L. Ditto

Enough is as good as a feast.

- John Heywood, Proverbes

“Enough” is defined as occurring in such quantity, quality or scope as to fully meet demands, needs or expectations. The main goal in financial planning is to develop an action plan that provides enough income to meet the clients’ goals. One client defined his goal as wanting to have his last check go to the funeral home. A character in a recent movie declared that he wanted his last check to bounce. Many clients define “enough” as the ability to provide a legacy to their children or grandchildren. Regardless of your definition of “enough”, it is important to clearly define what you consider to be enough and to develop a plan to reach that goal.

Financial planning is generally broken down into about five distinct but interwoven areas: Cash Flow, Retirement Planning, Investment Planning, Risk Management and Estate Planning. Each area interrelates with the others to create a comprehensive plan. A financial planner helps you to determine if “enough” is being done in each area to meet your goals.

Cash Flow
Those studying for an MBA are taught that cash flow is the life blood of any company; likewise, in personal finance, cash flow is the lifeblood of any plan. Cash flow determines if there are enough resources available to allow you to meet your goals. The focus of the financial planner is not typically on where the money is going but rather on if enough is being saved. If your goals include providing the college of choice for your children and purchasing a second home, there must be money saved for both events. We calculate the exact amount needed to be saved and discuss with our client whether or not that is realistic considering present and anticipated cash flow.

Retirement Planning
Once again, a review of goals determines if enough is being saved for retirement. In certain exceptional cases, some younger clients put such a significant portion of their income into retirement plans and other savings that they are not able to do or have many things currently because so much of their income is being invested for retirement. In such cases, they could actually save a little less and still be saving enough. (Please note, however, that such cases are exceptional and not true for most people.)

Investment Planning
A third area that is impacted by the previous two items is investment planning. When determining if enough is being saved, assumptions must be made about rates of return. Although financial planners have no control over the markets’ performance, they do know that the allocation of stocks versus bonds versus cash has a significant impact on the expected return of a portfolio. They explore whether or not there is enough equity exposure to allow the assets to grow. Similarly, it is important to maintain some equity exposure throughout retirement to combat inflation. It is also essential to have enough fixed-income exposure to generate an income stream. Finding the balance between equities and fixed income is an extremely important exercise.

Risk Management
The aforementioned areas – cash flow, retirement planning and investment planning – project what will happen if things go “as planned.” The implied assumption is how much will the client need to save if he or she is able to continue saving for the full time period. Risk management deals with the “what ifs”. What if something unexpected happens? What if the main earner passes away four years into a 30-year earning period? Obviously, the remaining family may not be able to save enough to meet the previously established goals. Risk management explores different methods to prevent this shortfall. The most basic solution is some amount of life insurance to replace the future earnings that he or she will not earn. Again, the financial planner determines what amount of life insurance will provide “enough” for the remaining spouse to put the children through college and enjoy a comfortable lifestyle. By determining the appropriate amount and type of coverage needed, the financial planner preserves current cash flow and provides the surviving family with enough to meet their goals.

Estate Planning
The final main area is estate planning. Estate planning essentially is determining who controls the client’s assets during his or her life and after his or her death. There is a balancing act between control and tax efficiency. To obtain tax benefits, individuals must usually relinquish control. Estate planning is done in conjunction with a client’s estate planning attorney, tax attorney and/or certified public account to ensure that our clients maintain “enough” control while still achieving the available tax advantages. Occasionally, there are “schemes” that seek to maintain control while enjoying all of the tax advantages. However, these cases sometimes end up in court with an unhappy outcome – an example of people’s desires devouring their feast.

Maintaining a focus on “enough” allows financial planners to plan appropriately for their clients. It eliminates the urge to be overly aggressive while providing a framework to make the very important and lasting financial decisions that all individuals face.

Jason L. Ditto, MBA, is an associate of FranklinMorris, Coordinating Broker for the Bar Associations Insurance Agency, Inc. For more information on the insurance benefits available to MSBA members, visit

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Publications : Bar Bulletin: August, 2005

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