A Few Truths About Financial Planning



A good definition of financial planning is maximizing your financial resources to live your best life. Financial planning is a dynamic process. It is not something you can buy online or on the shelves. It is an ongoing process, not a product. In this week’s article, we are going to take a look at a few financial planning truths.


A Financial Plan is Never Complete

Life changes quickly. And when this happens, your money moves in motion. This means every life event will have an important impact on every aspect of your financial plan. Some of these transitions may also create behavioral changes. For example, when you start a family, your core values may change and this will impact how you allocate your financial resources.

Even after death, a financial plan still remains intact with legacy, estate planning, and potentially charitable giving strategies. Because a financial plan is never complete, you can not set it and forget it. Life is dynamic and your financial plan should adjust as your life changes. Very few, if any, financial planning items are intended to be left alone.


Long-Term Thinking is an Acquired Skill

In a world of instant gratification and 1-click buying, planning can often feel distant. Teaching yourself to think in periods of several years or even decades requires training. A research study showed that people often view their future self as an entirely different person. This means if you view your future self as a stranger with nothing in common with your current self, it will be difficult to initiate a plan. Discovering your goals, values, and uncovering your ideal life can help connect you to your future self. Great financial planning encompasses continuity strategies to make the most of today while also planning for your future.


No One Says, “Started too early”

As a CERTIFIED FINANCIAL PLANNER™, my biggest competition is not other firms, but rather people’s behavioral biases. This could be in the form of overconfidence, confirmation bias, or just delaying to plan and letting life get in the way. One of the saddest situations I have encountered was working with a retiree who did not save enough. When this happens, there is a scarcity of important resources i.e. time and money. The end result is that your financial planning toolset is limited. Focus on what you can control so you can avoid scarcity situations in retirement. For my young professional clients, the plan is all about leveraging time to your advantage. And I have yet to hear someone say, “Shoot, started too early.”


Focus on What Truly Matters

A hidden benefit of financial planning is understanding what really matters. So many of us have been programmed through years of financial media and headlines that achieving a high investment return or beating the market is the primary goal. However, let’s look at a hypothetical example. Suppose an individual beat the stock market by 2% for over 20 years. However, if that individual failed to address their behavior around spending, they could still run out of money. You have to remember what you’re solving for at the end of the day. Sorry, but beating the market is not a financial planning goal. The goal is to capture, not beat, the global market.


Proactive Not Reactive

The value of financial planning is shifting your mindset from reactive to proactive. Many people approach me after a problem. With ongoing financial planning, we are able to work together by solving most problems before they even become issues. And when things come out of nowhere like health issues, recessions, or a job layoff, we have a solid financial foundation to handle the challenge.


What’s Most Valuable Is the Hardest To Quantify

It’s not unusual for potential clients to ask, “ Am I on track?”; “I need a financial checkup”; “What does it cost to set up a retirement plan?”; “My investments are good, but not sure about my taxes.” Don’t get me wrong, these are all important issues that need to be addressed. However, what these questions are missing is that you need to begin with goal clarification so you can determine the why behind every goal. If you don’t establish the why, there will not be enough motivation and personal acceptance to stay the course. A financial planner can help you stay the course and serve as your accountability partner. Money is ingrained in nearly every decision we make. Figuring out how to prioritize your resources based on your unique circumstances is a challenging task. Solving this requires ongoing discussions, coaching, self-awareness, and reflection.


Comprehensive “Do It Yourself” Financial Plans Don’t Exist

This goes back to overconfidence bias, which I wrote about in a previous post. I have worked with people from all over the country with various backgrounds and skills. The reality is, I have yet to see an individual build and implement a comprehensive financial plan on their own. Sure, some may have a solid investment plan, but do they have the right amount of insurance, an estate plan, a tax strategy? What about their cash flow? Are they maximizing all of their employee benefits? On top of that, are they actively setting and tracking goals with action steps?


Even as a CFP® Professional, I still find myself consulting with other CFP® Professionals on my own financial plan. Not necessarily because of the technical aspects of planning, but due to the process of talking with another individual about my goals and truly making sure my plan is aligned to the life I want to live.


The Bottom Line

Do you keep telling yourself you'll get a financial planner when you make more money? Or when you pay off more debt or saved up a certain amount of money? It usually doesn’t work that way. Working with a financial planner now can help you establish your unique financial goals to live your best life.


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