Sound financial planning doesn’t seem to be a big part of the average American’s everyday life. I get it. It’s not exciting, it’s not flashy and it doesn’t offer immediate gratification. And yet, finances are vital to our existence.
In a 2015 study conducted by the Financial Planning Standards Board, people admitted to not feeling confident about reaching their financial goals. With increasing demands on how money is spent and the limited amount of time available, we can’t ignore the fact that the importance of having a financial plan is ever increasing. The question is how to create a financial plan that works for you? (For more, see: 10 Things to Do Before Retirement.)
The key? Finding what is most important to you and placing it at the heart of your financial plan. Here are three tips on how to do that.
1. Start With What’s Important to You
Traditional financial planning is clouded with the idea that financial ingenuity and mathematics can create an answer to all of your financial questions. The truth is, financial planning should be about what’s at the heart of your existence.
What do you value and what do you want out of life? If we only paid attention to investment rates of return and increasing your net worth, you could end up living in a cardboard box with a million dollar investment account. Probably not the ideal outcome you’re looking for.
2. If It’s Important to You, You’re More Likely to Stick With It
Retirement, compound interest, inflation, etc. are all abstract ideas that challenge even the wisest individual’s resolve over time. The financial industry has been using scare tactics to get you to do what they want for the last 50 years. How many of us have heard if you don’t start saving now you’ll never retire? (For related reading, see: 5 Financial Planning Decisions You Won't Regret.)
If the heart and soul of your financial plan are achieving the things in life you cherish, your willingness to sacrifice will be that much greater. It’s one thing to save money out of fear of having to work well into your golden years. It’s an entirely different experience to save up to be able to retire early and travel the world or to quit your job and start your dream business.
3. Partner With the Right Financial Professionals
If you’re going to understand how to create a financial plan, you need to identify the people that will help you achieve these goals. Find a financial advisor who spends more time asking about who you are, where you came from and where you want to go than they spend talking about their theories and ideas.
Your financial planner should spend 70% to 80% of your meetings listening to what you have to say. A planner can’t guide you to make the right decisions if they don’t know what you value and what you want out of life.
Like most things in life, financial plans rarely work out exactly the way they were drawn up the first time. As your life evolves and your plans change, so will your financial plan. Having a plan that focuses on what’s most important to you and your family and working with the right financial planner will increase your confidence in achieving the goals that have the most meaning to you. (For related reading, see: 6 Life Events That Call for Professional Financial Advice.)