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The Value of a Financial Plan


The Value of a Financial Plan

There is a meaningful adage attributed to Benjamin Franklin that states “If you fail to plan, you are planning to fail.” This is true of many things in life but how significant is it to have a financial plan? Isn’t it sufficient to do the best we can when it comes to things like savings and planning for retirement and hope everything turns out for the best? Developing a comprehensive financial plan is so much work. You must account for issues like taxes and inflation and who really has the time anyway?

The goal of this blog will be to impart upon you the value of a comprehensive financial plan and, more specifically, why the aid of a financial planner/wealth manager in the development of such a plan may add even more value.

So, let us begin with some of the key benefits of developing and implementing a financial plan:
  • The planning process helps you to identify risks and to establish and prioritize short and long-term financial goals. This can be as straightforward as simply taking the time to name your most desirable financial goals to pinpointing that you may not be able to spend as much as you had hoped in retirement and how you might be able to alter that outcome before getting to retirement.
  • A financial plan can keep you and your family focused and motivated once you commit your plan to paper.
  • A financial plan will give you more confidence that you can achieve your goals.
As you delve into the process of developing a plan, here are some key issues to be concerned with:
  • Bad data input potentially yields a very rosy yet unrealistic plan outcome. Often, the biggest issue individuals and families struggle with when developing their own plan is the lack of a comprehensive picture of their expenses. By not accounting for all your expenses, it is easy to develop a great plan.
  • Implementation of the plan. Acting on your plan is just as important as developing the plan itself. Without the implementation phase, the development of a plan is wasted time.
  • Understanding that the one thing you know about the plan once it is developed is that it has flaws. There will be changes to your income, unforeseen expenses, complexity added to your financial life as you age and so on. So, knowing that the “plan result” will not be the real-life outcome helps you understand the significance of monitoring the plan on an ongoing basis and making changes as needed.
So, how can a financial planner/wealth advisor help you develop and implement a better plan than you can yourself?
  • The financial planning software available to most financial services firms is more comprehensive than any software tool available to the everyday consumer. Issues such as taxes, inflation, the proper tax treatment of stock options/restricted stock, what-if scenarios and Monte Carlo analysis are just a few of the features available to planning tools used by wealth advisors.
  • A wealth advisor brings objectivity to the planning process while most individuals view their own financial situation quite subjectively. An advisor can serve as the financial quarterback most of us need to recalibrate our life on the path to success.
  • A financial planner has experienced everything you have been through or will encounter. For each major financial event or life transition, a good planner/advisor has guided multiple clients through similar (if not identical) scenarios. This allows you to navigate through life’s milestones and hardships with an accountable partner.

Finally, keep in mind that the majority of wealth creation is not based on the day-to-day movements of the market; it is the behavior and discipline of the individual. Put more simply, the stock market is but a tool and just a piece of your overall financial plan. The plan is what should guide all investment and financial decisions. And the achievement of the plan goals should be your guidepost for success, not the return of your portfolio.

Written by

Mark F. Kleespies, CFP®

Mark joined THOR in January of 1997, and is the head of the Wealth Management team. His primary duties include working directly with clients and strategically planning the direction of the firm. Mark is a member of the Financial Planning Association and is a Certified Financial Planner.

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