Importance of a Financial Plan
Updated: Aug 4, 2020
Importance of a Financial Plan
In college, students don’t enroll in random classes for no rhyme or reason and hope they are on track to graduate. Individuals making a cross country road trip from New York to California would not leave their house and hope they make it to California without any directions. Of course not– it would be terribly inefficient and borderline crazy!
In the world of personal finance, however, this notion of either not planning at all or not thoroughly planning is a common tendency. Nearly a third of Americans do not have any type of financial plan1 whatsoever. Only 43% of Americans have a financial plan that covers five or more key financial planning elements1.
Financial plans are the road maps or curriculum requirements of our adult lives. They keep individuals on track to hit their goals. Financial plans are fluid and ever-changing to encompass both short and long-term goals. If a pothole is hit or a turn is missed, the financial plan is adjusted to make sure the same outcome is achieved. For example, a 20 -year- old may have different goals and objectives than a 30- or 40-year-old. A financial plan helps create clarity in goals and objectives while striving towards them in the most efficient manner possible. Why is it so important to have a comprehensive (multi-dimensional) financial plan?
A comprehensive financial plan pulls together interrelated areas to address and plan for all aspects of life. For example, when looking at retirement planning, it is important first to look at cash flow, budgeting, savings, and other areas to ensure there is a balance between long- term and short- term goals. Comprehensive financial plans create a well-rounded financial individual. What would happen if some
A financial plan is a very important part of our lives! Far too few Americans have one, regardless of its depth. It is the path, road map, and direction to help us achieve our goals. Plans are also not based a singular issue but encompass many topics ranging from investments, to debt management, to estate planning, to budgeting and savings, etc. Make sure you have a financial plan, and if there is one existing, make sure it has depth and is not a single issue plan.
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