“Failing to plan is planning to fail,” said a wise Benjamin Franklin.
Plans help us complete tasks that move us closer to reaching our goals and achieve success. Many people have career plans, travel plans and plans in place in cases of emergency or death. Yet, when it comes to investing, most people fail to have a concrete financial plan in place. This can jeopardize a comfortable retirement later down the road and leave you unprepared when something unexpected may happen.
Recent studies have shown that only 25% of Americans have a written financial plan. Meanwhile, 15% of Americans took the time to plan out their 2018 New Year’s Eve festivities.
While it’s easier to plan a dinner with friends than build a financial plan, the reason so few people have written plans is because there is never a deadline. New Year’s Eve will always be on the 31st, taxes are due on April 15th, but there is never a drop-dead date for when to finish your financial plan.
Studies also show that those who do have a written financial plan tend to have greater fiscal discipline and money habits. The study focused on Americans in or near retirement. It found that families that never planned had a net worth of $338,000, while Americans that developed and stuck to a plan had a net worth over $1,000,000.
Having a plan helps families understand why and how investment decisions are made, how to alter for intermediate and unexpected issues and the greater direction they are headed in the future. A plan doesn’t build net worth. A client with a well-detailed financial plan has the confidence and comfort from knowing where they need to be focused as a family.
There are many reasons why successful people may not have a financial plan—they lament that they do not enough time, they want to increase their income first or that they don’t have a pressing need for one. On top of these legitimate excuses is the fact that that establishing a written financial plan is complicated and time consuming. Whatever the excuse may be, a financial plan remains as one of the best ways to build and maintain a successful retirement, while meeting planned and unexpected expenses.
A financial plan is a template that allows individuals to map out their financial future. It also allows financial advisers to determine an individual’s risk tolerance and create a portfolio that compliments the financial plan. A financial plan is the first step to preparing for the future and avoiding financial failure later in life.