When Do I Need a Financial Plan?

Simply put, in today’s world, we all need a financial plan of some kind because we all have financial needs. For a young adult finishing college this might simply be accomplished by making a list of goals and creating some budgets in a spreadsheet. The more relevant question becomes, when do I need a financial plan created by a qualified professional?

Because financial plans are used to guide us in meeting our financial objectives, one way to know if we need a financial plan created by someone like an independent financial advisor would be to look ahead in our lives to see what events we plan to face that are most associated with substantial financial needs.

Another angle to consider is less tangible, it’s that of the emotional benefits, such as peace of mind, that may come from an on-going, life-long commitment to the financial planning process. We’ll examine both of these questions below.

Will Any of The Following Events Occur in Your Lifetime?

We plan for the financial demands of important events in our lives and in the lives of our family members. A great way to know if and when you need a financial plan is to ask yourself if any of the following important events may apply to you and your family:

• Will you (and possibly a spouse) retire with a need to support yourself in retirement?
• Will you buy a home or help a family member buy a home?
• Do you want to pay as few taxes as possible over the course of your life?
• Will you need to pay for the education of yourself or a family member?
• Are you planning for a marriage or divorce, your own or a family member?
• Are you planning to have children?
• Do you hope to pass some money onto your children or others upon your passing?
• Are you already saving into an IRA or 401(k), or plan to, and are confused about the details of all the different offerings and investment options?
• Do you have some expensive debt, such as home mortgages, credit cards, car loans or student loans to pay off?
• Is there a chance you might have to care for a dependent, such as an aging parent or a special needs child?
• Do you dream of starting your own business and, if so, will you need some start up capital to do so?
• Do you expect to receive an inheritance someday?
• Is there someone in your life who would face a difficult financial situation if you were to suffer an untimely death?

If you answered yes to any of these questions, then you at least have something to plan for. If you answered yes to several of them, then you most certainly can benefit from creating a financial plan together with an independent financial advisor experienced in the process of not only creating financial plans, but in working with you to see that the necessary strategies and actions are carried out to meet the objectives of the plan.

Would Any of the Following Bring You Some Emotional Benefit?

One of the things that takes the fun out of life is stress and worry, especially stress and worry about money. Having a financial plan can provide benefits beyond the numbers, such as peace of mind. When asking the question, “do I need a financial plan?”, ask yourself if any of these emotional benefits might apply to you:

• Knowing that you’re saving enough to support yourself during your retirement years.
• Knowing that you’re saving into the right types of savings accounts.
• Knowing that you’re saving enough for your children’s education.
• Knowing that you aren’t paying any more in taxes than what is absolutely necessary.
• Knowing that important decisions about how your money is invested are being made by a professional, qualified and unbiased investment advisor.
• Knowing that you can at any time, pick up the phone to call your financial advisor to ask important questions relative to your financial life and important events occurring in your life.
• Knowing that you have a plan to pay off unnecessary and costly debt, as well as a plan to take on necessary debt, should the situation demand it.
• Knowing you have clearly defined goals, a plan and strategy to achieve those goals, and that necessary action is being taken to execute that strategy.
• Knowing that as you immerse yourself in your professional life, family life and social life, that a trusted professional is watching over your financial life so you don’t have to.

Peace of mind comes from the feeling over time, as you live your life, that you are meeting your goals successfully, that money is there when you need it, and that it was a result of having planned well.

Related Articles

An Introduction to Financial Planning
The Contents of a Professionally-Created Financial Plan

About the Author

Todd E. Frank, CPA/PFS, MBA is the President and CEO of Frank Financial Advisors, a Registered Investment Advisory Firm (RIA) serving clients nationwide from our headquarters in Carlsbad, San Diego, California. As an RIA, Frank Financial Advisors is able to offer truly independent, fee-only financial advisory services.