There is a saying “A man with a plan is a man with a future”. Adjusting to make this gender-neutral, a plan for your future sounds like good advice. But what about a financial plan? Do you need one? Before this can be answered, the term financial plan should be defined. A financial plan is a plan for anything and everything that has to do with money in order to get to some set of defined future plans, be it retirement, paying for educations or that second home. It includes how much you should save, how you should invest, how you can minimize taxes, insure for risks and many other facets of finances, some obvious, some not obvious at all. A financial plan should be created by a licensed, trained financial services professional that can demonstrate expertise normally via independent credentials.
So, do you, the reader really need one? The answer is it depends on who you are. If you are in your 20’s or 30’s and are not yet investing or just getting by financially the answer is a resounding yes, you need a financial plan. For a younger person who is just starting out it is imperative that you set yourself up financially before you start making major mistakes so your future is optimized.
If you are in your 40’s, 50’s, 60’s or older and are doing well financially you could argue maybe you don’t need one, after all, you are doing well. However, getting a financial plan will certainly not harm you assuming you have it done by a competent professional. More importantly, and with near certainty, you will learn several things you did not know from your new financial plan that will improve your financial life, and this nearly always offsets any cost associated with it.
At the other side of the comfort spectrum, if you are 40 or older and either not doing well financially or are losing sleep about money, retirement, kids or parents futures, then without question a financial plan is an exceptional investment. Having clarity of mind and peace of mind are invaluable states to be in.
Can you do your own financial plan and save the hundreds, or perhaps thousands of dollars? Yes, theoretically you can do your own plan. Just like you can be your own plumber, electrician, architect or any other specialized profession, you can comb the internet and embark on self-study. The downside may not be as obvious as a bad wiring job of your newly finished basement, nor may you see the results quickly of missing something.
If topics like 529 plans, itemizing deductions, Traditional versus Roth IRAs get you excited and up in the morning, and your pulse quickens at the thought of understanding Alpha and Beta, then perhaps doing your financial plan could be worth it. The only two remaining issues are expertise and emotion. Have you studied as much as the professionals? How many plans have you done? As for emotion, one of the biggest reasons to have a professional handle a plan is that money and all things related are emotional and a disinterested third-party can make suggestions that don’t have the built-in conflict of it being your own money clouding your decisions. For example, lots of people don’t buy life insurance, a critical part of a plan, because they deny their own death could happen at an inopportune time.
For most people, a financial plan is a very beneficial document to have and exercise to go through. Just how valuable depends on your situation and where you are at this particular time in your life-and what you want out of the duration of it.
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