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.
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:
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.
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:
The list could go on and on. It may be overwhelming, but your financial plan can help you feel confident in your next step.
Sometimes, the most challenging part about managing your money is knowing what to do with it.
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
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Craig Toberman is a Partner at Toberman Becker 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.