There are a lot of people out there who know they need financial planning but are still unclear about what financial planning actually is. So to help you better understand the importance of financial planning, I’ve debunked four major myths about it.
1. Financial planning is not a product.
A lot of people assume that a financial plan is a product they buy once, and then they’re set for the rest of their lives. Wouldn’t that be great?! Financial planning is not a product—rather, it’s an investment in budgeting, managing and mapping out your finances to help you achieve your life goals. Financial planning gives you a clear picture of where you stand today, and then provides direction and structure to get you to where you want to be tomorrow. Think of it as a roadmap getting you from point A to point B in the most efficient and effective way.
2. Financial planning is not just for rich people.
In fact, financial planning is a necessity—not a luxury like most people think—and everyone needs it. Whether you’re making $30,000 per year or $300,000 per year, financial planning is a way to help you manage your finances and learn what you need to do to grow, protect and use your money to live a life you can enjoy every year.
3. Financial planning is not an exact science.
Rather, it’s the art of navigating the different challenges and concerns at any given life stage. Yes, of course, you will be able to develop a financial plan that identifies the gap between where you are today and where you want to be later in life, but the art is in finding the most effective and efficient way to achieve your goals. For example, maybe your financial plan confirms that you will need to save $300 per month toward your retirement goal. That would be the science to money management. The art is deciding which retirement account is the best to use given your income level, tax bracket, etc., and also finding the right investments to go within that retirement account.
4. Financial planning is not boring.
It can be exciting and fun, especially if you take a DIY approach to budgeting – but you’ll need to make sure you bring that energy into the equation. If you’re always stressed, overwhelmed and anxious when you think about your money, then that’s exactly what you will experience when you deal with your finances. You get out whatever you put in, so check in with your emotions and make sure you are bringing positive energy into your financial planning endeavors.
In summary, financial planning isn’t about just about “getting rich” or finding the hottest stock, it’s about helping you reach your life’s goals. It’s a lifelong process that can be very rewarding, and one you should start as soon as you can.