Why You Need A Financial Plan

There are a few times a year when the volume of calls to my office from people seeking financial advice goes way up. One of them is in January when New Year’s resolutions are top of mind and another is the 30 or so days leading up to the tax deadline in mid-April.The “January effect” arises from a wish to get a fresh start on financial planning; the “tax effect”  has to do with figuring out how to pay less to Uncle Sam.

But most people would be better off if they didn’t wait for a deadline or time of year to take a hard look at their finances. Financial planning can be compared to being proactive about your health – we’re way better off maintaining a healthy lifestyle than waiting for a medical crisis to change our habits! Same goes for your finances. Making smart financial choices early and often will ensure a strong financial future.

For sure, meeting with a financial advisor isn’t always the easiest thing to do. It’s hard to talk about money especially if you feel “clueless” (not my word, but a word many women use to describe their financial savvy) or embarrassed about some of the financial decisions you’ve made in the past. But a good advisor doesn’t care about any of those things; they want to objectively help you make good financial decisions going forward.

When I ask a potential client why they contacted me, here are some of the most common answers:

  • I want to retire early and do something different with my life. Can I afford to do this and how soon can I do it?
  • I am retiring in 5 years and I have no idea if I’m on track.
  • I want to buy a house and I need to know how much to save and what I need to do to qualify for a loan.
  • I am afraid to invest my money in the stock market because I don’t trust it, but I’m not earning any return on my money in the bank, what should I do?
  • My father (or mother) just passed away and left me some money. I want to make sure that I make the right decisions with this money and need help and a plan.
  • I want to send my kids to private schools but they are expensive. I want to know if I can afford it and save for other goals like retirement.
  • I’m single and I don’t want to rely on anyone else for my financial health, I want a plan to reach my goals.
  • I’m going through a divorce and I worried about my financial future.I need help figuring it out.
  • I make a great salary but I spend too much. I want help to set up a budget, reign in my spending and start saving and investing more.
  • My spouse/partner passed away and I’ve never managed the finances alone. I need someone I can trust to help me.

Some of these situations are like a medical crisis – “oh my gosh…I’m retiring in 5 years and I haven’t saved enough money!”, others are unexpected, such as a divorce. But all share one thing in common: all situations will be less stressful and better managed with financial education and a plan.

Photo by Teerapun/freedigitalphotos.net

Editor’s note: This post was originally published on April 7, 2014 and has been updated and refreshed.

Related articles:

Do You Need A Financial Advisor?   Investopedia
Six Important Steps to Hiring a Financial Advisor  Forbes

 

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