Thanks for visiting Telos Financial’s blog! Telos’ tag line is “Plan for your Purpose” and the blog is for anyone who wants to learn more about financial planning, personal finance, and achieving financial goals. The purpose of the blog is to introduce financial planning topics and start discussions about that will educate, benefit, and improve your financial life. My purpose is to help you achieve your telos!
My post today is about some of the more common questions and objections I get about the necessity for a financial plan. I’m sure you’re aware, but I firmly believe every family would benefit from working through a financial plan.
Question: “Do I need a financial plan?” Answer: Yes. The hard part is that it takes time, energy, and involves difficult conversations, but the benefits are it requires you to achieve certainty in where you are and creates a confidence about where you want to be. It requires you to really think about your goals and priorities. Even if you don’t know where you want to be in 20, 30, 40 years, walking through the many areas involved in financial planning are good to examine in depth and might create some clarity out of the discussion. Many apply today; some examples of that are making sure you’re watching your cash flow, they are meant to ensure your wishes are carried out in the event of a tragedy, make sure you have proper insurance, make sure your investments are allocated appropriately for your desired & required level of risk, make sure you’re not paying unnecessary taxes, if you’re a small business owner you have to think about these as a business and an individual.
Question: “I’m a millennial and won’t retire for over 30 years, do I need a financial plan?” Answer: Still yes. The plan will probably change over time, but it is worthwhile for anyone in their earning and accumulating years.
Question: “I have student loans, so I don’t need to plan until those are paid off, right?” Answer: No. Paying off student loans should be part of your financial plan. Student loans are debt from past decisions you made. A financial plan is a map for how to get to where you want to be in the future. It’s one piece in a financial plan. It may be big, may be small, may be resolved in a few years, or maybe not for a long time.
Question: “I save to my 401k and get a match from my employer, isn’t that enough?” Answer: It may be and if you’re saving the maximum allowable annual amount to your 401k plus getting a match from your employer, you’re certainly doing more than the vast majority of folks. A 401k is designed for retirement (though there are exceptions). If you want to pay for kids’ college, or have any other financial aspirations, you may not need an in-depth plan. But a simple financial plan will still give you a more clear picture of how long you ‘need’ to work, how much you can spend in retirement, different scenarios, etc.
Question: “I’ll get in contact with you when I have some finances to plan.” Answer: Alright, alright, that’s not a question. . . BUT! It is a common sentiment I receive. I think most people would agree that the more money you make, the easier things are, though I’ve encountered plenty of one percenters who are retirement age and who have saved virtually nothing. The point is, it doesn’t matter how much money you make. The benefits of financial planning aren’t exclusive to the wealthy. It certainly is more complicated as the dollars increase, but simple financial planning still provides guidance, confidence in your future (rather than the defeatist, “I’ll never be able to retire, so no need to save” attitude), and a plan to get there. It is something you can probably do yourself if it’s that simple. I am just encouraging you to do it. If you want professional help, you can certainly find a planner who will review your information, assumptions, and calculations to confirm it’s all reasonable.
Question: “I did a plan 15 years ago; do I need to update it?” Answer: Almost certainly yes. Plans change, goals change, jobs change, income changes, maybe you received a win fall or had an unexpected expense that changed things, nearly all financial plans will have some assumptions change over that time and need to be updated to match the current reality. At Telos, our software updates financial plans daily. Now, daily is overkill, but if something changes after the plan has been executed, our systems allow us to quickly and efficiently react. If you had a plan done that long ago, it was probably done in over 100 pages, on some fancy paper, in a fancy binder, and because it’s so pretty, you probably still have it. The downside is, the information is probably not worth the materials it’s printed on or the storage space it consumes. The base data and assumptions have probably changed. I’ve seen old plans that assumed high growth rates that aren’t appropriate today. These may need to be redesigned, not just due to the assumptions about return on investments, but also to update income, goals, and current values.
Telos Financial is Michigan’s Financial Planner for millennials,young professionals, small business owners, and their families. If you are interested in getting help with your personal finances; I would love the opportunity to meet with you. Email me at firstname.lastname@example.org or call me at 734-468-3050 to schedule an introductory meeting and we can talk more in person. Telos Financial is a fee based, holistic financial planning firm located in Plymouth, Michigan serving young professionals and families. Dennis LaVoy, CFP®, CLU® founded Telos and partners with his clients as the financial advisor for Ann Arbor, Detroit, and across the great United States of America.
Conclusions expressed in this material are personal opinions. Individual circumstances vary.