And Why Financial Planning is Especially Important for Aviation Professionals

According to Charles Schwab’s 2019 Modern Wealth Index Survey, only 28 percent of Americans have a written financial plan.1 Most of the remaining 72% of Americans said they didn’t have enough money or time to make a plan worthwhile, or that the process was too complicated. However, those with a financial plan consistently maintain healthier saving and investing habits. Everyone can benefit from having a financial plan in place, not just the wealthy, but implementing and adhering to a financial plan is especially vital for aviation professionals for several reasons.

  1. An Unpredictable Industry
    The airline industry is known for being volatile. Bankruptcies, bailouts, mergers and acquisitions have become commonplace, and external factors such as the COVID-19 pandemic and the 9/11 terrorist attacks can be devastating to airlines and their employees. As recently as 2019, Boeing’s CEO said that a global pilot shortage is one of the biggest challenges facing airlines,2 yet less than a year later, COVID-19 has forced airlines to lay off pilots and flight crews and encourage early retirement.

    The career uncertainty faced by aviation professionals means that proactive saving, smart investing and detailed retirement planning are vital for achieving financial independence. The best way to accomplish these goals is with a financial plan.

  2. Mandatory Retirement
    With a mandatory retirement age of 65, there are no missed approaches or go-arounds in retirement planning. If you haven’t properly planned for retirement, you don’t have the option to continue working as you would in other professions. Having a financial plan in place can help you strategically save and invest for retirement.
  3.  Expectations
    Airline pilots are known to have high salaries and often face pressure from co-workers, family members and friends to showcase a certain lifestyle. Trying to live up to these expectations can take a toll on your long-term financial security. A solid financial plan can help you live comfortably within your means while remaining focused on the future.
  4. An Unexpected Medical Condition
    If, during your airman medication certificate renewal, you are diagnosed with a disqualifying medical condition, you may be at risk for losing your job. A financial plan can help you be prepared for an unexpected event such as a disqualifying health condition.

Any good financial advisor will tell you that the first rule of successful personal finance is to have a clearly defined plan in place. This point is emphasized by Peter Mallouk, the founder and CEO of Creative Planning, in his book The Five Mistakes Every Investor Makes and How to Avoid Them. Not having a plan is mistake #1.

Peter invokes Yogi Berra’s sentiment that “If you don’t know where you are going, you’ll end up someplace else.”3 You wouldn’t take off without knowing your destination. However, Peter advises that, “Most investors invest without an endgame laid out in advance. Without a destination, it is easy to drift off course. Without a plan, it is easy to change the strategy midstream, increasing the odds of messing everything up.”

Before you spend or invest a single dollar, you should have a plan. It doesn’t need to be a 150-page road map of how you will budget, save and invest every penny for the rest of your life. Instead, start with a plan that is simple and straightforward.

Need more incentive to begin the planning process? Consider the following. A written financial plan can:

  • Increase your financial confidence and peace of mind
  • Help you budget and meet your financial goals
  • Lead to better habits
  • Help you identify, avoid and address various risks, including investment risks, insurance risks and estate planning risks
  • Guide your risk tolerance and inform how aggressively or conservatively to invest
  • Help you prepare for an early retirement
  • Allow you to save adequately in an emergency fund
  • Help you set priorities and live comfortably while also planning for the future
  • Provide financial security in the case on an unexpected event such as a disqualifying medical condition, layoff, merger/acquisition or airline bankruptcy

Regardless of whether you have a financial plan in place, you are likely aware of the benefits. Less talked about are the ramifications of not having a written financial plan.

Ramification #1
Coming up short on your financial goals

It is often said that failing to plan is planning to fail. By not taking time to reflect on where you are financially, where you want to be and how to get there, you are unlikely to achieve your financial goals. Planning early gives you more flexibility when life throws complications your way.

Ramification #2
Missing an opportunity to leave a legacy

Tax and inheritance laws are increasingly complex, and the best solution for other investors may not be what’s best for you and your family. Documenting your financial priorities, such as paying for children’s education, purchasing a home, funding your retirement, investing in a business or enhancing the amount you can pass to your heirs following your death, can help you choose the right path toward achieving your long-term goals.

Ramification #3
Taking on more risk than necessary

There is inherent risk in everything from investing, to not investing, to income streams, to the general risks of life and your career. Many of these risks are necessary and worth taking. Others should be planned for by implementing appropriate insurance and a deliberate, diversified investment portfolio. Without a plan, however, it’s difficult to identify what risks you are taking that are necessary, which ones you shouldn’t be taking, and which ones can be mitigated through appropriate actions.

Ramification #4
Having an investment strategy that is not aligned with your goals

A good financial plan helps you understand your current financial situation in relation to the goals you are trying to achieve. Only with this knowledge can you begin to identify an investment strategy to help you get to where you want to go. Without a plan (in other words, without knowing where you are and where you’re going), it’s impossible to build an investment strategy to achieve your specific goals.

Ramification #5
Trying everything because you aren’t focused on the right thing

The options for where and in what to invest are endless. Do you choose mutual funds, exchange-traded funds, hedge funds, stocks, bonds, annuities, other insurance products, REITs, commodities…? The list goes on and on. Without a plan to keep you focused and on course, it’s easy to get sidetracked with the wrong investments charging high fees. A solid financial plan can help you stay the course by providing guidelines around the type of investments that are right for you as well as those you should avoid.

Having a plan is essential to building, understanding and achieving your goals. Planning can help increase your level of confidence and comfort, result in more constructive financial behavior, and help ensure your family will be provided for in unexpected circumstances. Ultimately, a good financial plan puts you in control of your future.

Starting a financial plan may seem like chore, but it doesn’t have to be. If you find you’re having a hard time taking the first step, a professional advisor can help.

Aviation Financial Freedom is a specialty practice of Creative Planning. Each of our dedicated teams specializes in working with pilots and flight crews and includes an attorney, a CPA and a CERTIFIED FINANCIAL PLANNER™ practitioner. These experienced professionals work with clients to develop personalized financial plans that take into consideration a wide range of factors, including their current financial situation, goals for the future and any challenges they may face. If you’d like advice about whether purchasing a vacation home is the right move for your, or for any other financial matters, please schedule a call.

At Creative Planning, we provide our clients with the best path to wealth accumulation, retention and transfer of assets. We believe that information and education are essential to developing and maintaining a financial plan and investment portfolio. We strive to organize and simplify life in such a way that maximizes the family’s enjoyment of their wealth now and in the future.