It seems the common perception is you need to be nearing retirement or have already accumulated a significant portion of your life savings before considering to work with a planner to build a financial plan. While starting a financial plan is better at any age than not completing one at all, I’d like to share the top ten reasons why financial planning can be beneficial for younger individuals.
- Identifying goals – Financial planning is useful for helping individuals identify and rank important goals. Making a plan to succeed is very difficult if you don’t know what your goals are, or how they rank in importance compared to one another.
- Identifying the ‘cost’ of your goals – When modeling long-term financial plans, you will find out what it will take to achieve various financial goals and determine how realistic your goals are.
- Getting a grasp on the effect of how small changes now directly impact your long-term results– Utilizing software and other tools, financial planners can forecast the effects of small changes like investment allocation changes, or how just a 1% increase in savings could have on long-term goals like purchasing a vacation home.
- 4.Developing a financial plan provides a roadmap to financial security – Having a plan provides individuals with confidence in their financial decisions. The ability to sleep well knowing that they are on track for their goals and understanding what risks they can and can’t afford to take.
- Being better prepared to face future obstacles – Having a financial plan makes an individual more prepared to deal with life challenges like the unexpected loss of a job, significant illness, having children, and can help with other unpredictable curve balls life will throw at us.
- A better understanding of financial relationships – Working through a financial plan with your planner can help teach you about the interconnectivity of the financial aspects of your life. For example, how the difference between taking two vacations vs. one vacation per year can impact your expected retirement date.
- Building a plan helps you avoid mistakes – Knowing what you should be doing is also a great way to know what you should be avoiding. “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” – Warren Buffet
- Determining how much to save – Do you know how much you should be saving? This is a difficult question that often remains unanswered until too late in life. There are a number of potentially dangerous ‘rule of thumb’s out there. This is a question best answered by constructing a financial plan, measuring the probability of reaching your goals, and adjusting the variables you can control.
- Financial plans can be used to measure your progress – Have you ever written something down on a checklist? Yeah? How did it feel to cross it off? Pretty good right!? By building a financial plan, you create for yourself a checklist to measure progress and achieve your goals.
- Creation of wealth – Successful financial plans help individuals achieve their goals and enjoy the life they have worked so hard to earn. “Wealth is the ability to fully experience life.” – Henry David Thoreau
Thanks for taking a look, if you have any questions, please feel free to reach out! Also, if you or anyone you know would be interested in discussing financial planning, we would be happy to connect.
Charlie Achterkirch, CFP®
ISC Financial Advisors