There are plenty of reasons people avoid financial planning. If you’re like many, you wave it off as overwhelming, complex, or boring. Maybe you think of saving for retirement as something for later—with no real idea of exactly when “later” is. Or perhaps you have a vague idea that if you just put away something every month, things will work out. Unfortunately, that’s not going to cut it.
Whether you fear making the wrong decision, or you’re just busy with other things, putting off financial planning is a common trap. No matter how much money you have or how old you are, every adult needs a financial plan.
What is a Financial Plan?
It’s not surprising that people are intimidated by financial planning. There are a lot of moving parts, after all: personal retirement savings, estate planning, insurance, tax management…are your eyes glazing over yet?
There’s a simpler way to think about it: the goal of financial planning is to figure out how much money you’ll need to meet your expenses throughout retirement and not run out of money. Until you know that number, you can’t truly set yourself up for success. Therefore, when you sit down to plan with a financial advisor, make sure they start with:
- Your financial situation now - This includes your current savings (and savings habits), current assets, any debts, income and expenses, and your lifestyle
- Where you want to be in the future - Consider your goals for income and lifestyle in the short-term and long-term future (ie in 5 years, in 20 years, and in retirement)
Once you know these things, you can create your map for how to get there, aka your financial plan. Your financial planner will help you evaluate the difference between your today and your tomorrow to help you get to where you want to be.
A Financial Plan Should Align With Your Goals
A solid financial plan includes all the usual suspects, like:
- Diversified asset allocation
- Reducing fees and expenses
- Minimizing your tax burden
- Developing an investment strategy that sticks
- Budgeting realistically for the future
But most importantly, you need a personal retirement plan you can get excited about. And for that, a plan has to align with you! Your goals, values, and vision for your life—both now and in retirement. A financial plan takes into account all aspects of your life: personal, financial, and your dreams and desires for an ideal retirement. Ask yourself:
- What are your personal retirement goals? - Consider what age you want to retire and where you might want to live
- What are your financial goals for retirement? - Perhaps you want to fund your grandkids’ education, make an impact on a cause you care about, or buy a second home
- How do you picture your life in retirement? - Whether it’s traveling, lavish parties, or a simple, quiet life, your ideal retirement is up to you
That’s what makes planning so much fun for Certified Financial Planners™ like us—going beyond the money to help you build a retirement you’ll love!
Why You Need A Financial Plan
A financial plan works the same way as a road map or GPS. Without a destination, direction, or goal, it’s easy to go nowhere with your finances. A comprehensive financial plan helps you identify your destination so you can get there faster—and plan for bumps in the road.
Without a plan, it’s easy to get led astray along the way, take too long to get there, or worse, never arrive at all. On the other hand, creating a financial plan has some very clear emotional and mental benefits, like:
- Helping you clarify and prioritize your goals
- Motivating you to achieve those goals
- Providing a compass for when you get stuck or feel uncertain about financial decisions
- Enabling you to plan for major life events like buying a house, raising children, moving, and retiring
There are financial benefits too, of course. A wealth of research suggests that just by defining clear goals, you increase your chances of success. When you prioritize paying off debt, saving, and spending within a set budget, your net worth increases.
Having a financial plan now will benefit you in retirement. For many, working with a fiduciary financial advisor such as a Certified Financial Planner™ (CFP®) to create a plan for retirement provides peace of mind. It can help you feel more in control of your financial future and keep you on track to meet your retirement goals.
Align Your Finances To Your Goals
If you’ve been putting off retirement planning, start now! But remember, retirement is not one size fits all. The only way to know what is best for you—both financially and in life—is by understanding your goals, emotions, and values around money.
To handle something as precious as your retirement investment plan, find a financial advisor who fits with your family's values. Ideally, a financial advisor will work to align with your lifestyle goals, as well as financial. Not to mention be a bona fide expert in their field.
All of that means you can have peace of mind and live without stress in retirement. And have the money to enjoy this phase of life and have fun!
For more help creating your retirement roadmap, get Retirement Secrets—the book to help you plan and prepare for life’s ultimate adventure! Order your copy now.
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