Do you have a mapped-out plan for your future? Do you know the best steps to take to achieve your goals? Financial Planning could be the answer. In a world where 75% of Americans are winging it when it comes to their financial future, a holistic financial plan will set you ahead of the crowd.
What is a Financial Plan?
Having a dynamic and workable financial plan helps you look at all aspects of your finances and project what things will look like on your current trajectory and if you make improvements.
Financial planning is a collaborative process. With the help of a fee-only, fiduciary Certified Financial Planner™, you can have a 3rd party evaluate where you stand financially and help you set up realistic next steps to point you in the direction you want to go, to achieve the things you want to in life.
Examples of next steps from a financial planning engagement include:
- making sure you stay at a healthy spending level
- saving the necessary amounts in the right types of accounts to prepare for retirement or future college tuition
- getting estate documents updated to make sure you’re in control of your assets and body no matter the circumstance
- making adjustments to save on taxes
A CFP Board 2012 survey found that over half of people with a holistic financial plan feel “very confident” about their financial picture vs. those who’ve never had financial planning completed. And a 2016 study showed that simple online financial calculators are often wrong when predicting retirement readiness.
Why Financial Planning Matters
Having a financial plan gives you immediate feedback on the feasibility of your goals. Additionally, it’s rare to accomplish a goal (and even more rare to accomplish multiple goals) without a plan of attack to get you there. Accountability motivates us to action.
A financial plan is beneficial at any point in life, but often the benefits can be more evident when preparing for major life events or going through life transitions.
Major life events that prompt one to seek a financial plan include the following:
- Planning for children
- Planning to pay for college
- Receiving an inheritance
- Selling a company
- Purchasing a new home
- Death of a Spouse
- Claiming social security
Even if major life changes are not around the corner, financial planning will help you see if you’re on the right path. It’s like going to the doctor. You realize the need to visit a doctor when changes in your health occur. Regular health physicals, help you find potential problems you’re unaware of. Financial checkups serve a similar purpose. Often there is financial leakage or missed opportunities that people miss due to lack of awareness. Financial planning allows for routine tests, to assure you are maximizing financial opportunities.
No matter where life has you, a financial plan can make sure you are reaching your peak financial fitness.
Steps for Successful Financial Planning
To have a successful financial planning relationship, progress should be easy to see. Breaking the process down in small steps, keeps momentum going throughout. Seeing progress along the way keeps the motivation strong. This is evident in the beginning stages. Many people become discouraged right off the bat, when they realize the work required to gather their financial information. Feeling overwhelmed, progress can stop as soon as it begins. This is where starting with a checklist of financial documents to gather can help. Making the conversations with a financial planner the most productive. From there, you will follow these steps to create your financial plan.
- Agree on how you and a financial planner will work together
- Gather information about your finances and set goals
- Analyze and evaluate your financial status
- Develop and discuss recommendations
- Put your financial plan into motion
- Monitor progress and stay on track
Financial Planning Implementation Tips
Once your financial plan has been created, monitor it. This is the most important step! We find that many clients who only have a financial plan and don’t have an ongoing relationship with a financial advisor typically do not implement all of the recommended changes, mostly because life is busy and the plan is forgotten.
Having the regular accountability of a financial advisor is the best way to make sure you stay on track. In fact, a new study from Vanguard, found the emotional support of an advisor accounts for half the value in the planner-client relationship.
There’s no better time to start than now.
Helpful Links and Resources
- CFP Board – Benefits of Financial Planning
- The Balance – How a Financial Plan Can Help You
- Wall Street Journal – A Guide to Financial Planning