Financial Planning is Not Just for the Affluent

Financial Planning is Not Just for the Affluent

November 02, 2021
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Many may think financial planning is only needed for wealthy individuals with complex needs, but the reality is a financial plan is something that can help everyone — not just the wealthy. 

The fact is, if you have any source of income, you’re always deciding what you’re going to do with it: — what you’ll spend it on (groceries, rent or mortgage, clothes), how much you’ll save. Financial planning simply means having a well-thought-out strategy that helps you achieve longer-term goals while meeting near-term needs. 

Just as it’s impossible to build a skyscraper without a blueprint, we all need a detailed plan to construct a financial framework that takes care of not just our day-to-day needs, but also to lay the groundwork for the future we envision. Creating a practical and actionable financial plan is your first step.

Research has found that most people are concerned with ensuring they can cover their financial needs during their entire lifetime, maintaining or improving their standard of living and being able to cover unexpected medical costs. But everyone also has unique priorities.

What matters most to you: caring for your loved ones, buying a home, preparing for retirement? Maybe it’s all of the above, and more. Regardless of your current financial circumstances, a financial plan can help you see new possibilities and take charge of your future by implementing new tools and behaviors.

Research shows that just 30% of Americans are truly financially healthy. 50% are just coping and nearly 20% are financially vulnerable — meaning, they’re struggling with nearly all areas of their financial lives. This means that 70% of Americans could use help with their finances regardless of income.

To start taking control of your financial future, map out your full financial picture, which includes all of your debt (don’t forget the interest rates) and income sources.

Two simple tests:

  1. Do the math to find out if you have six months of emergency savings readily at hand 
  2. Use a basic retirement calculator to see whether you’re on track to cover your future needs.

This snapshot can help highlight some of your baseline financial strengths and weaknesses.

Wherever you find yourself, one way to put yourself on more solid ground is to create a goal and then work toward it one step at a time. The key is to make your goals Specific, Measurable, Action-oriented, Realistic and Time-bound (SMART):

  • Specific: You can’t achieve a goal unless you know exactly what it is. For example, instead of saying you want to “save more money,” target a specific amount, like $100 more per week.
  • Measurable: The goal needs to be something you can track. A goal of saving an extra $100 each week is something you can monitor over time.
  • Action-oriented: Define what you’ll do to reach your goal. For example, to save $100 more per week, you might cut back your budget to find an extra $100 each week or freelance on the side.
  • Realistic: Is your goal achievable? If saving $100 more per week turns out to be too high, maybe you’d have to adjust the target to $50.
  • Time-bound: Every financial goal should have an expiration date, so you know where you are in terms of your progress. When time’s up, you have a clean slate for reassessing and setting a new goal.

With this type of process, you can begin to build a practical financial plan that reflects your goals and priorities. 

Creating a financial plan is a basic, but necessary step toward securing your financial future regardless your income. Whatever your financial dreams, your road to success will require patience, diligence and careful planning.

Don’t expect to reach your ultimate destination overnight, but the sooner you decide to sit down with a financial professional to create a thoughtful financial plan, the smoother and more focused your journey will likely be — no matter what life throws your way.