Do You Have a Plan?


Depending on your personality type, a plan can be your best friend or your worst enemy. It isn’t that the plan itself is evil; it is the idea of facing reality that sometimes really terrifies people. This can be something as simple as making plans for the weekend or as complex as figuring out whether you can afford to send a child to college in five years. The task becomes even more daunting when we are planning for something we don’t necessarily have a strong comfort level with, whether it is the complexity of the variables or just the unknown. Oftentimes, the hope is that if we ignore it long enough, it will either go away or just figure itself out. This is especially true when it comes to finances, as statistics show that only 44% of Americans actually follow a budget.

In the U.S., our complex financial system allows us many options when it comes to living, investment, and borrowing needs. Due to the complexity of the situation, most people find it is easiest to deal with what is directly in front of them and not worry about what comes next. The data proves this correct, with only 30% of Americans having some type of long-term financial plan.1 But why would something so important and worrisome not be the main focus of most people? In a recent poll, 77% of those surveyed said they are indeed worried about their financial situation.2

Creating a financial plan helps us achieve a structure that will allow us to follow and attempt to pursue our goals over time. As we begin to follow this path, we will have confidence when facing new challenges.

There are three steps in financial planning. They are:

  1. Create a plan.
  2. Implement your plan.
  3. Update your plan over time.

So, what does a sound financial plan look like? This will be different for everyone, since we all have different focuses and goals. Some of the primary goals should be to protect yourself, your family and your assets. While this seems basic, it should be top-of-mind to avoid falling into the trap of focusing on maximizing assets above all else. This process is more about preparing your finances so you can overcome challenges that would typically result in significant financial loss.

The importance of having a plan is finding its way into most investment firms and is either offered for a fee or made part of an asset management service. An advisor can help you identify your assets, establish goals and find solutions that make your plan easy to revisit and adjust. This isn’t to say you cannot create and manage your own financial plan; but it may be easier to work with a professional who has created many financial plans and by asking the correct questions, may help identify unknown issues and uncover any shortfalls.

Setting up and implementing a plan is a great start; but do not leave out a very important but often overlooked step: periodically updating the plan. Many people forget that it isn’t necessarily just changes in our own financial situation, but also external factors that will affect our plans. Examples include inflation, Social Security adjustments and education costs. Just because your plan was sound when you established it doesn’t mean it will remain sound throughout your life.

All three steps are equally important in creating and maintaining a financial plan. If you have a financial advisor and do not have a financial plan in place, you need to ask them this question: how can we have an investment plan if we don’t have a financial plan that it fits into?




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