What is a “Financial Plan”?

A recent study by Charles Schwab found that 75% of Americans don’t have a financial plan.

Understandably, nearly half of those who don’t said it’s because they thought they didn’t have enough money to bother. More surprisingly 40% said it’s because it either never occurred to them that one was needed, or because they wouldn’t know how to go about creating a plan in the first place!

That’s fair. When you think about it, what does “having a financial plan” even mean – is it a strategy on how to invest in the stock market? Is it stringently following a monthly budget? To be asked whether you have a “financial plan” is like being asked to drive to the most important job interview of your life, but first you are dropped off in the middle of nowhere without a map. The stakes are high but the instructions are vague.

The truth is financial planning is a highly personalized process and so it will mean different things to different people. Think of it as a way to: 1) take inventory of your current financial situation; and 2) analyze what, if anything, should be done to maintain or possibly improve your situation. Just as no two families are the same, no two financial plans should be the same.

So how do you get started on a financial plan?

Step one is getting organized.

Maybe that means finally putting down on paper all your financial assets and debts so it’s easier to keep track of. Maybe that means figuring out what to do with the 401(k) from that job you left five years ago. Maybe it means sitting down and actually verbalizing what you want to accomplish in the first place. The goal of getting organized is to build momentum for the larger tasks at hand.

Step two is determining what you need to do to stay on track.

Trying to retire early? Then maybe you need to save more or invest more prudently so you can enjoy retirement the way you want to. For young families – do you have a will? Have you named guardians for the kids or made sure you have enough life insurance should something happen to you? Maybe you’ve already done these basic housekeeping items, but stock market volatility is keeping you up at night. A financial plan can help stress test all these “ifs”, “ands”, and “buts”.

Whether you’re just starting out or you’re a year away from retirement, whether you have $10,000 or $10,000,000 – you need a financial game plan. The point of an “A-Z” financial plan is to help you tackle the little things one-by-one because eventually, these little things add up to the bigger picture.

With the start of a new year, there is no better time to revisit your financial plan – or get started on one for the first time. At Taylor Hoffman, your objective is our passion. Learn more here.


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