What if you could face any market crash or life curveball without losing sleep over your finances? It’s a possibility well within reach with a written financial plan.
Whether you’re aiming to build your first $100,000, secure your retirement, or look beyond yourself with legacy and charitable planning, engaging in financial planning with a Certified Financial Planner™ can improve your effectiveness in achieving your goals. And not having a financial plan, especially when things get stormy, can feel like trying to maneuver a ship without a helm.
As I go into my 10th year as a financial planner for individuals and families, here are the top reasons you need a written financial plan:
- Guide Investment Decisions
A long-term perspective based on a written financial plan helps foster investment discipline. When markets are volatile, a well-structured plan keeps you focused on your long-term goals, not the day-to-day or even year-to-year fluctuations and headlines. Studies show that investors who work with financial planners often achieve better outcomes, not because the advisors necessarily pick better investments, but because they help investors make informed, strategic decisions consistently over time. A 2021 Vanguard study found investors with advisors grew their portfolios 3% more annually. When things get rocky, that’s the best time to call your advisor and go back to your plan.
- Cash Flow and Budget Planning
Your journey to financial independence begins with managing your cash flow effectively. Whether you’re currently saving $5,000 per year or $500,000 a year, reviewing your saving strategy with an advisor can help you efficiently allocate resources today in order to achieve the wealth you want tomorrow. Putting together a personal balance sheet and cash flow statement can help you plan for the future more effectively. Long-term wealth accumulation usually comes down to saving and making your money work for you in the most tax-efficient way possible.
- Retirement Decisions
As people approach retirement, there is often a behavioral switch that must be addressed when preparing to live off of savings and investments instead of a paycheck. I have seen it lead to poor results like worrying and bad investment decision making. Moreover, I have seen people second-guess their decision to retire from a financial needs standpoint, especially when the market tanks within a year of their retirement decision. A financial plan will provide the mathematical probability that your retirement and legacy goals are funded.
Completing your first financial plan can usually be accomplished in two to four meetings. Once it’s in place, revisiting it periodically or after major life changes keeps it aligned with your evolving goals.