Creating a financial plan is like building a blueprint for your finances—it’s a detailed vision for your next step. But why is creating a financial plan so valuable, and how can it impact your life for the better? Let’s take a look.
A Financial Plan Allows You To Think Deeply About What’s Most Important
Creating a financial plan forces you to consider what’s most important to you. A variety of things could be especially valuable to you, including:
- Charitable giving
- Building wealth
- Financial stability and security
- Being debt free
- Financial freedom
But just knowing your values isn’t enough; you must know how to turn those values into concrete goals. That’s where an experienced financial advisor comes in.
For example, if your goal is to be debt free in 5 years, then your advisor can create a debt repayment plan that fits within your budget so you can pay off debt without over-extending yourself.
Your financial goals inform the rest of your strategy—how you invest, save, spend, and give—and your financial plan is a step-by-step document of how you will achieve those goals.
A Plan Helps You Confidently Navigate Life Transitions
Life can throw you many curveballs, but to hit a home run, you have to prepare for as many possible scenarios. A financial plan gives you vision and direction as you navigate the changes ahead.
A Charles Schwab study found that 65% of people with a written financial plan say that they feel financially stable and 44% of those planners felt very confident they would reach their financial goals.
Unfortunately, a financial plan is not a crystal ball. There are external events that can impact your well-thought-out plans and goals. But, a financial plan can help you prepare for foreseeable changes and protect against the ones you can’t (think: insurance and risk management).
Take retirement, for example. While the golden years are certainly sunny and exciting, there are several financial and personal elements to consider before transitioning away from your career to your next chapter. You will need to have a plan for:
- Medical expenses and long-term care
- Where you will live
- What your lifestyle will look like
- Estate planning and asset management
The list could go on and on. It may be overwhelming, but your financial plan can help you feel confident in your next step.
Your Financial Plan Can Help You Make More Informed Decisions
Sometimes, the most challenging part about managing your money is knowing what to do with it.
- How should you invest your next dollar?
- How can you leverage an inheritance?
- Are you saving enough for retirement?
- Should you reign in your spending?
- Can you afford to take on debt?
- Did you know that there could be so many questions about money management?
Your plan can help you answer those questions.
Take your spending habits, for example. When you take a deep dive into your finances, you may notice that you spend more on dinners and TV subscriptions than you initially thought. Or perhaps you’ve made some big impulse purchases that are starting to hurt your wallet. Your financial plan can help deter these impulse purchases by changing your perspective on spending.
Your financial plan is rooted in your goals and values, so if you realize that your spending habits could force you into a later retirement, you’ll probably be less inclined to buy a new car you don’t need. A goals-based financial plan can help you make more informed spending decisions because your long-term goals are at the forefront of every decision.
When you know where you’re going and what it takes to get there, your decisions become rooted in what’s best for you.
Remember that you don’t have to answer all of these questions on your own. Working with an ongoing financial advisoris crucial so you can ask questions and feel supported while on your financial journey.
A Written Plan Makes Volatile Times More Stable
A written plan gives you a deeper understanding of your investments, including your risk tolerance, risk capacity, time horizon, and goals. With that, you’ll have a 360-degree view of your long-term vision and what it will take to make your dreams a reality.
That context can help you in times of uncertainty: a down market, a job loss, an early retirement, not getting as much value for your business, etc. You’ll have peace of mind knowing you have a plan to overcome these obstacles.
Plus, your plan can always grow and change as you do. It’s a living document that you should update as your needs and priorities change. Life events like starting a family, getting married, or earning a promotion can drastically impact your financial plan. That’s why it’s important to review your financial plan with your advisor regularly.
A Trusted Professional Is Worth Their Weight In Gold
Creating a valuable financial plan starts by working with a financial advisor that you trust and who understands your goals.
Money is complicated and trying to handle every piece of it on your own can be overwhelming. Creating a financial plan and working with a financial advisor can bring your peace of mind and empower you to use money in a way that’s tailored to your unique objectives.
That’s what we’re all about at Toberman Wealth: empowering our clients with the knowledge and financial plan they need to reach their goals. Get in touch with us today for fee-only financial advice in St. Louis and beyond.
Craig Toberman is the Founder of Toberman Wealth – a fee-only, fiduciary financial advisor based in St. Louis. He assists families and businesses with strategic financial planning and long-term wealth management. He has over a decade of experience in financial services and has crafted custom financial plans for hundreds of families and businesses.
Craig received a Bachelor of Science (B.S.) degree in Agricultural and Consumer Economics from the University of Illinois and a Master of Business Administration (M.B.A.) degree in Finance from Saint Louis University. He is a Certified Financial Planner (CFP), Chartered Financial Analyst (CFA) charterholder, and Certified Public Accountant (CPA).
Craig is a member of the National Association of Personal Financial Advisors (NAPFA), Fee-Only Network, and XY Planning Network.
Craig lives in the greater St. Louis area with his wife, Ally and son, Hank.