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Why Do I Need a Financial Plan?

|  October 1st, 2021

Why Do I Need A Financial Planner?

Have you ever tried to drive to an unfamiliar destination without a map? Well, okay, a GPS these days! What would happen if you did? You’d very likely get lost. You’d drive in circles, backtrack, waste time, gas, and money. The same can happen when you don’t have a financial plan. And if driving without a map is bad, going into your financial future without one is worse. You need a financial plan for the same reason you need a map. So you have a clear picture of each step required to get you to your destination.

Small Detours

A good financial plan is both solid and fluid. Solid in that it takes into account the unknowns in life that most of us encounter. Will we marry, have children, how many children, lose a job, get divorced, lose a spouse, retire just before a recession?  A good financial plan won’t need to be adjusted much, whatever the answers to those questions are.

But the plan is fluid enough that minor adjustments can be made that will keep us on the same path forward towards our financial goals.

Big Detours

While minor detours can be foreseen, sometimes we encounter big detours that none of us saw coming. The pandemic is the perfect example. By the time it was upon us, it was too late to pivot in a way that might have insulated us financially.

An Ounce of Prevention

When people face small or big detours in life, they’re often caught unaware. If they did see the changes coming, they often don’t preemptively plan for them financially. The event happens, and then they have to figure out the money aspect. In some cases, they may be making these major financial decisions under a great deal of stress when the primary breadwinner dies unexpectedly, for example.

What a Financial Planner Can Do For You

There are many rules of thumb in personal finance that people often apply to themselves and think they have a financial plan, have an emergency fund, save a certain percentage of your income each year, stay out of debt, buy life insurance.

Those are sound tenets but they’re too broad and too general to be considered a sound financial plan. If you and your spouse are both high-earners in secure jobs with no children and no debt, a three-month emergency fund might be sufficient. If you and your spouse own a small business, have a mortgage, and have two kids in private school, nine to 12 months of savings might be more appropriate.

A good financial planner knows these kinds of details about their clients so they can tailor a financial plan for them.

Even the best financial plan won’t work if you don’t stick to it. When the market hits a slump or takes a nosedive as it did in the first half of 2020, many people panic and start selling their investments. Sometimes they do it even though they know it’s a mistake. Most of us understand buying low and selling high, and selling in a recession is the opposite. But the panic is such that we sometimes act against our interests. A good financial planner can help talk you down from these kinds of panic-based investing decisions.

Even very happily married couples often fight over financial issues. Having a financial plan can help prevent that. You and your spouse have a plan, so the decisions have been made. And in the event of a standoff over a financial decision, a financial advisor can act as a neutral party.

A financial plan can remove the stress finances can cause during happy and sad times. A new baby is a cause for celebration, but it can make a happy time stressful if a family isn’t financially ready. A financial plan allows you to fully enjoy those kinds of moments free of financial worry. And when there is a tragedy, you can focus on your own and your family’s well-being rather than money. You planned for this.

When you’re ready to take control of your future with a financial plan, I’m here to help.