What is one thing you always do before going on a trip?
You make a plan.
Whether you are the type of person who plans out every meal in advance and maps out the quickest routes or someone who likes a more laid-back schedule and gets lost among avenues, you create some sort of plan to help you make the most of your experience.
Financial planning operates in a similar way. An incredible aspect of financial planning is that it is built uniquely for each person. The way you construct your financial plan has a lot to do with money, of course, but also everything to do with your outlook on life, values, habits, and priorities.
Here at TFS, we believe that money is a tool you can use to make impactful, enriched decisions that ultimately improve your life and the lives of others around you. Our job is to help you create, manage, and execute a financial strategy that enhances your life, bringing you closer to your personal goals.
Today we are going to talk about a topic near and dear to our hearts: why we love financial planning and find it necessary. While we could talk about this subject for hours on end, we have narrowed it down to the top four reasons. We are excited to share this adventure with you.
1. It brings joy to the journey
A strong financial plan provides a roadmap for moving forward. It acts as the catalyst for your financial decisions, habits, and actions and can help inform your progress. Think about it like google maps on a road trip. If you have a 300-mile road trip ahead of you, it is great to see the progress you make along the way, even if that progress is small like 50 miles. A financial plan can do that.
See, in financial planning, there are multiple destinations. Why is that? It’s mostly because you have several goals, values, and priorities driving your decisions. You may have a goal to purchase a new house or contribute to your grandchild’s education or find financial independence. Your financial plan can illustrate your progress toward reaching those goals every step of the way from saving to investing to smarter money management, and more.
A financial plan lets you enjoy the journey. Your goals never stand still and your financial plan provides you with a framework to continually strive to reach those goals. It also gives space to celebrate accomplishments along the way, crafting the life you want a step at a time.
Financial planning isn’t about a destination. Rather, it is about how you continue to use the tools and resources you have to bring fulfillment into your life.
2. Planning leaps beyond just finances
There are so many distractions in modern life, ones that can stand in the way of reaching your ultimate goals. While a financial plan can help you get on the road, it isn’t the only thing needed to keep you on the path.
Financial planning is more powerful when coupled with behavioral financial advice (BFA) and BFA helps you stick with the plan that you create. BFA is a process that combines traditional financial advice with psychology and neuroscience to enhance the decision-making process and ultimately lead to a more positive outcome.
Take the example of the market impacts of the coronavirus. It is no surprise that the markets have taken a tumble and someone who just has an investment portfolio without a strong short and long-term plan to support it, might be more tempted to make an emotionally-charged investment decision. But someone who understands the role their investment portfolio plays in their larger financial strategy, as well as their personal life, might be more likely to make an informed decision.
Behavioral financial advice is an excellent addition to a financial plan because it combines money and humanity. Humans are so complex and by understanding how you make decisions, we can help you create a plan that enhances positive decision-making habits, which in turn directly impact your financial ones.
There are so many obstacles that will present themselves. When your financial plan is coupled with behavioral advice, you can learn to navigate the obstacles and still work toward your many goals.
3. A plan accounts for uncertainties
One thing we know about life is that it constantly changes. Uncertainties are baked into the framework of our lives and a strong financial plan can help weather those changes and come out the other side stronger and more determined.
Take retirement, for example. A comprehensive financial plan can help clarify so many uncertainties in a retirement plan like,
- Social Security reduction
- Pension reduction
- Low investment returns
- Higher inflation
- Long term care or medical expenses
- Large one-time expenses (vacation house, boat, extended travel)
- Relocation and other moving expenses
- Disruptions in the economy
This is a pretty long list, but a strong financial plan covers all of these topics and more. In all likelihood, you will be dealing with a combination of these at any given time. But financial planning gives you the tools to work through those uncertainties.
It also gives us the ability to predict how a specific spending pattern might impact your future. This can be especially helpful as you create a retirement income plan, assess your cash flow, determine a long-term investment strategy, and better align your spending with your goals.
When done right, a financial plan can be like a key, unlocking the doors to your financial and personal future.
4. It proactively helps to increase your resources
A key feature we love about financial planning is that it is proactive, working each and every day to help guide your choices. Financial planning shouldn’t be reactive. If it is, then then it isn’t designed to address your interests in the long-run.
At TFS, we almost always play the long game. Investments aren’t meant to be a quick-fix. Rather when investments are properly allocated, aligned with risk tolerance and capacity, and fit your financial goals, we can help you create a wealth-building strategy that works with your lifestyle.
Having a financial plan is quite simply the glue that shows you how to utilize your resources to pursue what is most important to you. Setting up a plan to reflect your values and goals is more than just having an investment plan. Investments are just one piece of your plan. While an important one, we look at the full scope of your plan, every angle, line, and point that makes it function. This gives us a unique ability to serve you in a comprehensive, holistic way.
Your financial plan matters
Plans encompass so many aspects of our lives.
They can be something small like planning out your day or large like mapping out a career trajectory or brainstorming your dream retirement. Even when fuzzy, a plan can help you chart a course forward along the path toward your goal.
We love financial planning and the value it brings to our client’s personal and financial lives. Ready to learn more about how a comprehensive plan can benefit you? Take some time to talk with our team today.