Why Financial Planning?
The adventure of a lifetime.
A couple of friends from Austria (Hans and Franz) arrive into Los Angeles, CA on an early July morning. They're jet-lagged and exhausted, but also excited. This is the start of an epic adventure they've been dreaming about for 3 years: an all-American, 6-week road trip from the golden California coast to New York City.
Hans and Franz have never done something like this, but they think ,"How hard could it be?" They've got a good amount of money saved up and some pre-packed snacks. So they head to the rental car place, pack up their stuff, drive off the lot and hit the road. "Let's drive the coast! It looks amazing," they say, and off they go.
It's smooth sailing away from the big city. The beaches, the sunshine; everything just feels so right. Four hours into their trip they suddenly hit a snag as they pass a big green sign that reads: "US/Mexico border - 5 miles." Yikes.
They turn around and shrug it off, "What's a little lost time; we're on an adventure!" They grab some lunch, then back towards LA they go only to find... the worst bumper-to-bumper traffic ever. 15 hours after landing, Hans and Franz are now finally back in LA, but it's too dark to continue. They'll have to stay for the night and try again tomorrow.
So what do Hans and Franz teach us?
Planning tip 1: A little planning and direction at the start can save time, money, and headaches.
Compounding mistakes.
That story may not seem that bad. But what if the next day an early morning accident involving an oil truck spill shuts down entire 10-East freeway? What should have been in the rear-view mirror is now causing them to miss a concert in Phoenix. Or the lost time forcing them to choose between the Grand Canyon or Bryce Canyon. Those early mistakes compound into bigger ones down the road with the primary cost of those mistakes being lost opportunity.
Planning tip 2: The biggest cost of not planning is lost opportunity, and it compounds the longer you continue in the wrong direction.
Your financial journey.
Financial planning is not just about defining goals and mapping out where you want to be in 30 years. People often think financial planning is (1) only for the 1%, (2) tedious and time-consuming, or (3) not worth it for their situation. Starting something new always feels foreign, and there will always be excuses. But the main reason to start planning as early as possible is to get past the excuses and moving in the right direction. When you don't know what you don't know, it's easy to make mistakes. A good financial plan helps you avoid common pitfalls so you can keep moving forward to make the most of the opportunities in front of you.
Good financial planning will help you:
- Define and set goals
- Bring your whole financial picture together
- Identify potential mistakes
- Keep you on track
- Tell you what's important
- Measure your progress and monitor changes
- Offer alternatives for big transitions or what if scenarios
- Encourage you to save and build wealth
- Highlight blind spots
- Give you confidence to live your life and spend on money on the things most important to you
The importance of a fiduciary.
If you're just getting started, there are plenty of cheap options out there if you don't feel you have enough to pay for a financial planner (yet).
For those who can afford and would like a financial planner to develop a financial plan and help you implement it, choose to work with a fiduciary advisor who specializes in financial planning. Even if you like planning on your own, having someone in the passenger seat to make observations and suggestions along the way can be valuable. There may come a time when driving isn't as fun as it was, or there isn't enough time to continue doing so.
Planning tip 3: Work with a fiduciary financial planner who has your best interests in mind.