In the world of wealth management, it’s surprising how many wealth builders, from their 30’s to their older years, underestimate the value of a personal financial plan. According to a 2023 Charles Schwab survey, around one-third of Americans have a financial plan for their goals.
Managing your wealth without a financial plan is like flying a plane without a map or navigation tools. Sure, the plane is filled with fuel, the wings and engine are working, and ideally you can see points of reference to guide you along the way. But without a flight plan, how effectively is the plane getting to where it wants to go?
To detail the significance of this invaluable tool, here are five reasons to put a financial plan in place and keep it updated.
Guidance for Life Transitions:
As people find themselves at the crossroads of various life transitions, be it changing jobs and careers, starting a family, sending kids to college, or preparing for retirement, a financial plan provides a roadmap tailored to your unique circumstances, helping you navigate those transitions. From adjusting investment strategies to optimizing tax planning, do your planning in advance so you can avoid missing out on strategic opportunities.
Risk Mitigation and Asset Protection:
A good portfolio manager will mitigate investment risks to the best of their capabilities, but that does not take into account all of the risks a wealth builder experiences. Risk mitigation starts with a diversified investment portfolio, but also includes insurance coverage, estate planning, and many other strategies that are reflective of your specific financial situation.
Reference Point for Financial Decisions:
Financial plans are a living document that should be updated annually or regularly. Making updates and seeing where things are and how things have progressed is a great reference point when making important financial decisions. A financial plan is the friendly reminder that yes, you’re still on the right track to financial success if you make that decision, even if-and-when life presents the occasional detour. And when those detours happen, financial planning is even more useful.
Long-term Investment Success:
Our financial plans are designed to align perfectly with your investment preferences and objectives. A financial plan provides insight to our portfolio management since we will know your current situation, long-term goals, risk tolerance, and time horizon. This disciplined approach helps us stay on the same page, helping you feel confident leaving the day-to-day investment management to us.
Peace of Mind and Empowerment:
Perhaps the most underrated aspect of having a comprehensive financial plan is the peace of mind and confidence that originates from knowing you have a well thought roadmap tailored to your specific financial aspirations. As we often say, partnering with us brings the peace of mind that comes with having a plan that is designed to help you achieve your goals. If you spend any time wondering about your financial progress, it will answer your questions and enable you to focus on what’s important to you. A financial plan empowers you to make informed decisions and “get a handle” on a subject that is exhaustive and bewildering to millions of people.
Whether you’re actively managing your portfolio or entrusting it to a financial advisor, having a strategic roadmap for your future is critical. According to Schwab’s survey, of the one-third of Americans who have a financial plan, 7 in 10 said they were more in control of their finances and 9 in 10 were confident they will reach their financial goals.
At IEC we have a Certified Financial Planner ready to help you build a financial plan and put it into action. Without one, you might as well be an airplane pilot with no flight plan.