One thing that does not get talked about enough are medical costs which go beyond Medicare. These costs can be complex and ever-changing.
Thanks to the internet and YouTube, doing-it-yourself (DIY) has taken on a new life. For example, if there is a problem at home with a clothes dryer, many will get online, order the key part, and install it, thus, saving the cost of an in-home repair. Information that once might have been hard to find outside of specialized publications has become accessible to everyone. But there are limits to self-empowerment. One area in which some people may be overconfident is financial management. There is more to financial planning than setting some goals and pinching some pennies. Here are five basic benefits that may come from working with a financial planner on an organized financial plan.
First off, a financial plan helps you test whether goals are realistic in the stated time frame.
Legendary Green Bay Packers coach Vince Lombardi reportedly once said, “We didn’t lose, we just ran out of time.” That’s how it can be with savings plans. How long will it take to accumulate enough for the down payment on the house, or reach the target for college savings? The variables are the savings rate, the rate of return on savings, and time. A financial plan provides perspective on integrating savings strategies.
A financial planner will also help you identify overlooked risks.
What are the chances of dying before meeting one’s financial goals? What are the odds of becoming disabled during a career? What will happen to the mortgage payments if a spouse dies prematurely? A financial plan will quantify these hazards and provide mitigation strategies, often with insurance plans.
One great thing about having an effective financial plan is that it allows you to measure progress.
A financial plan includes benchmarks along the path toward the financial goals. If the targets are not being met, a mid-course correction may be required. Having a good financial planner will help you establish those benchmarks and make appropriate adjustments to help you stay on track.
Not only that, but a financial planner will help fix mistakes.
There are a number of routine money management mistakes made by a surprisingly large number of people. Failure to take full advantage of a company retirement plan is one; paying high interest charges on credit card balances is another. A financial plan will identify opportunities to bring greater efficiencies to money management and flag the pitfalls that could undermine the plan.
Most importantly, working with a financial planner and following a comprehensive financial plan will help you build wealth.
A household financial survey conducted by the Certified Financial Planner Board of Standards found that families with financial plans generally have more money saved and are more likely to have paid their credit cards in full. This was true even for families in the lowest income bracket. For those with a plan, 41% of those earning less than $25,000 were paying off their credit cards every month. Only 26% of those in the $25,000 to $49,999 income bracket without a financial plan were paying off their cards, even though they had more resources to do so.
So, how do you get started?
Having a financial plan and following through on it takes some of the uncertainty out of life. It gives people a feeling of greater control over their financial destiny. Financial plans are not just for the wealthy – they offer a path for becoming wealthy. They are not just for the young, or for the old, because financial plans address needs throughout one’s lifetime.