Everyone Needs a Financial Plan

Having no plan is, well, just that, no plan. A simple but powerful play on words and a reflection on ourselves in any aspect of our lives. Think about all the things you do in your life and all the things you are going to do that require major planning. You go to school, go to work, have kids or not, move or relocate out of state, buy or rent a home, switch jobs, pay taxes, retire, travel the world, etc. All these major life decisions take critical judgment and a strategic plan. Some are better at this than others, but at the end of the day, crucial decisions are made, and a plan is executed.  

Balancing Fun and Responsibilities

We as human beings naturally tend to want to spend time making plans to have fun, like planning your next vacation, for instance. Rarely, however, do we make a plan with as much enthusiasm to go to the dentist or call to get a leaky roof fixed, and it seems our culture has put making a financial plan in this category (with no disrespect meant to our dental and contractor friends out there!). This actually makes little to no sense when you think about it. The excitement, suspense, nervousness, and fear that come with the crucial question of how the major life decisions mentioned above are going to be financed can be addressed with a financial plan, yet for some reason, most avoid it. 

Take a recent Modern Wealth Survey published by Schwab during the pandemic in 2021, when individual interest in the stock market and investing reached generational highs as people in lockdown had more time to themselves and more time to plan. It was discovered that only 33% of Americans had a written financial plan. Furthermore, almost half of the survey respondents said they didn’t have enough money to make a plan worthwhile, that it was too complicated, or they didn’t have the time to make a plan in the first place.

The Importance of Written Plans

A close-up of a checklist being marked off, symbolizing the creation of a detailed financial plan.

Naturally, when we’re asked to “do the math” as to what these major life decisions are going to cost, making a decision out of impulse, or worse, fear, rarely yields good results. However, how is it possible that 2/3rds of Americans say they have no written plan while making continual life decisions without actually thinking about the financial impact? The fact of the matter is that we have been conditioned for faith and hope when making major life decisions, but rarely have we been financially conditioned to plan for major life decisions. 

But faith and hope aren’t plans. A plan is a plan. We do put hope and faith in experts from different fields, so why not do that with a financial expert? Some suggest that don’t want to be sold anything. The reality is most independent Registered Investment Advisors (like Gasima) are duty-bound legally and ethically to serve the best interest of the client and not sell them anything they don’t require. The truth is, most people don’t want to face the reality of their finances and make the hard choices that come with looking at their personal situation. But does it have to be looked at from a negative point of view? Why don’t people get excited about the possibilities of what a plan could do for them and what lifestyle choices it could finance? 

It’s kind of like a personal relationship. Sometimes we’re happy and in love and other times we’re angry and frustrated. The reasons are complicated, and things are not so easy to describe or accept. And much like our relationships in life, when it comes to personal finances, we sometimes love them, hate them, are indifferent to them and many times emotional about them. So why not do something about it, just like you would with any other relationship? Because essentially, that’s what we’re talking about: a relationship that needs to be managed. This just happens to be the relationship with your finances, and by the way, America; your relationship is in trouble if you don’t have a plan! 

Long-Term Benefits of Financial Planning

In today’s world, there are plenty of things that don’t bring immediate satisfaction in our lives, yet we know they are good for us in the long run, but for whatever reason, when faced with “no pain, no gain” (most likely when looking at weight loss goals for example) we give up and try again, never thinking about stopping and getting a plan together. Believe me, I’ve gone from one extreme to another myself, having dropped major weight and kept it off for years, only to shoot back up and have “trouble getting back to the gym” or use excuses like “I’m traveling” that hold me back. The fact of the matter is that in those moments, I’ve lost my relationship with weight control and diet. But enough about my failings, back to the topic! 

Picking up on the gym example, there are plenty who think they can do it themselves, kind of like DIY of financial planning. No need for a trainer, they just get after it and lose the weight. And, for those inclined to do the work, this can be productive. The same with managing their finances by themselves. One should be proud if they can produce the results all by themselves. What a huge confidence boost that could be and potential rewards. There is a huge place for people like this in personal finance. And that is a plan! Of course, there is the other extreme that can’t swing a hammer or spread mulch in your yard and absolutely can’t stand going to the DIY stores like Home Depot or Lowes on the weekend. These people clearly need some help and, at the end of the day, need to focus on what help to actually employ. 

These are just some starter examples as to why it’s so crucial to get a financial plan in place. In our next piece we’ll go through how to be find the right person to work with and what building a financial plan actually means. For now, be forward thinking, manage your relationships and stop operating without a plan! 

The information contained in this article is for educational purposes only, this is not intended as tax, legal, or financial advice. One should always consult with the tax, legal, and financial professionals of their choosing regarding their specific situation.
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