3 Reasons Why You Need a Financial Plan (and what's really involved)Submitted by AssetGrade, LLC. on May 20th, 2019
Submitted by Pat Cote on May 20, 2019
Everyone needs a financial plan, whether their situation is simple or complex. Everyone has some goals for what they would like money to do for them, whether they are building up their wealth, maintaining it, giving it away or spending it in retirement. There is still a good chance that you don’t have a financial plan in place, or if you do, it was a less-than-ideal plan put together by someone on commission to help sell their financial products.
There are three reasons why you need a good financial plan put together by a fiduciary and not a salesperson. A good financial plan:
1. Helps you to think about your goals
What do you want to achieve for yourself and your family? This often goes beyond money - it is a healthy exercise to take a step back and think about what is important to you.
2. Gets your finances in order
Clean up and consolidate your old accounts (401Ks, IRAs, brokerage accounts, etc.). Nail down what is coming in, what is going out, how much you have and how much you owe. As an added bonus, a good plan often helps to reduce taxes by putting investments in the right type of account (surprisingly, this is easy to do, but missed most of the time!) and knowing which accounts to access, and in which order, in retirement. Most importantly, a good financial plan aligns your finances with your goals.
3. Is very satisfying
People are often surprised about how good they feel once completing the plan, even if their finances are not perfect. If your finances are not in good shape, it still feels good to address them and figure out how to get on track. If your finances are in great shape, it is satisfying to hear the confirmation by a professional. If you fall in between, a good plan helps address the uncertainty and identify what you need to do to get on track
Most importantly, putting the plan together does not need to be a months-long ordeal. For many people, a good financial plan can be pulled together over the course of a few meetings.
The plan itself does not need to be overly complex or long. The better plans are manageable, capturing all of the points above. They make the next steps clear and help keep you focused on what is needed and will help you achieve your goals.
To make sure you are working with a fiduciary and not a salesperson, you should make sure that your financial advisor is fee-only. Fee-based sounds the same, but it actually means the advisor double dips – they charge a fee and get a commission to sell certain products from the fund companies. The advisor should also be a CFP® (Certified Financial Planner™), as CFP®s have rigorous training and need to adhere to principles that put their clients first. Fiduciaries are legally required to put their clients’ best interests first… which is what people expect!