Financial planning isn't as simple as budgeting for the next mortgage payment or deciding whether or not to take a vacation this year. Proper comprehensive financial planning is a tool that many people don't take advantage of. It involves several economic decisions, including planning for one's retirement and children's college education, establishing an investment portfolio, choosing the appropriate insurance policies, and mitigating tax liabilities.
Working with a financial planner can be the difference between retiring early and not retiring at all. A reliable financial plan helps families save for their children's college education and mitigate the impact of taxes when they make a significant financial decision, like selling their house or starting a business.
Everyone has different strengths and abilities. Some are expert engineers, whereas others have a deep understanding of the law. They may understand the essentials of budgeting money, but portfolio theory and estate planning concepts are beyond them. Although admirable, trying to expand their abilities past their circle of knowledge and experience may lead to grave errors.
Working with experienced financial planners can help these people achieve their financial goals. Winston Wealth Advisors offers comprehensive financial planning services to help people through each significant financial decision and ensure they stay on top of their long-term financial goals, like buying a house or planning for retirement.
Financial Literacy: A Short Background
In childhood, there's usually no significant pressure to establish a savings account or look into long-term investments. Instead, kids attend school, make friends, and participate in extracurricular activities, like sports or band.
Most children exit high school with minimal financial planning, budgeting, and investing knowledge. Except for those who go to college and major in business, it's often the case that the closest young adults get to education in personal finance is a semester of algebra or calculus. Ultimately, a person's first real-world encounter with the importance of money is likely to be when they sign up for their company's retirement plan or rent an apartment.
Why is such an important skill — one that drives many of the most crucial decisions in life — so largely ignored? Although we can't answer that, we can take heart in knowing that some institutions are beginning to see the disconnect.
Currently, only seven states require high school students to undergo a personal finance semester before graduation, but other states are jumping on the bandwagon. Several bills are in progress to require high schools to teach personal finance as a standalone course.
Hopefully, establishing a baseline awareness of basic money concepts will be enough to encourage young adults to take an active role in managing their money and keep them from making serious mistakes that prove costly later in life. However, individuals who recognize where they lack the expertise to organize their short- and long-term financial goals are often better served by working with experienced financial planners.
The Basics of Setting Goals
Goals can be simple and short-term, like losing weight for a wedding or reading one book per month, or longer-term, like earning a new professional certification or learning a foreign language.
Establishing a goal is the first step to realizing it. However, simply stating the intent and taking no action isn't helpful. For example, if a person wants to lose weight, eating the same foods and making no effort to change their exercise habits will result in minimal weight changes. Instead, the person must commit to regularly working out and sticking to a well-rounded diet.
Studies show that writing down goals significantly improves the chances of meeting them. In fact, people who draft their plans in writing are 1.2 to 1.4 times more likely to achieve them. A written goal is a constant visual reminder of what one seeks to accomplish. In addition, writing something on paper helps the brain to store it in long-term memory.
Similarly, financial goals are much easier to attain when the exact processes needed to meet them are in written form. Consider two financial objectives. The first goal is "Save for retirement." The second goal is "Save $1M for retirement by the age of 45."
The first goal isn't clearly defined. There's no pre-determined minimum amount of money to save. It's lackluster and doesn't provide much direction. The person who establishes this type of goal could hypothetically put $10 in savings and declare that they've met their goal.
On the other hand, the individual with the second goal has established a clear benchmark for what they're attempting to accomplish. They have a dollar amount in mind, and they've given themselves a time limit for meeting it. The person may not have determined what they'll need to do to reach their goal, but a financial planner at Winston Wealth Advisors can undoubtedly help them work out the details.
What Does a Comprehensive Financial Plan Include?
When establishing a comprehensive financial plan, it's essential to remember one's goals and tailor the financial plan to meet them. Furthermore, each stage in life often comes with different financial objectives, which should be factored into a solid financial plan.
For example, someone in their 20s will likely seek to pay down their student loans and save enough money to buy their own house. Someone in their 30s might consider saving for their children's college education, and a person in their 40s may dedicate their financial plan to retaining enough money to retire.
Comprehensive financial plans consider many different factors, including:
- Budgeting monthly cash flow
- Establishing an IRA
- Creating an emergency fund
- Taking advantage of employer-sponsored retirement plans
- Purchasing the appropriate types of insurance
- Planning for major purchases, like a car or new home
- Preparing for significant life changes, like marriage, divorce, and children
- Mitigating tax liabilities
- Funding a new business
- Setting up and managing an investment portfolio
- Estate planning
Anyone can benefit from a comprehensive, evolving plan that changes with their life circumstances. No one's life is linear — there are ups and down, and transitions occur that change financial goals over time. Working with a financial planner helps manage the monetary consequences of lifestyle adjustments, ensuring a smooth transition and keeping the focus on long-term financial goals.
What Are the Benefits of Working With a Financial Planner?
There are several benefits to working with a financial planner. Here are a few examples:
A New Perspective
Having an expert take a hard look at one's financial situation can help a person realize where they're making financial mistakes. Financial planners are familiar with all types of financial goals. They help people determine where they can cut back on their expenses and when it's time to put more money into savings.
Financial planners have no emotional stake in your money, so they're able to be objective in their recommendations. Because they help so many people from all walks of life, they have experience with all types of financial circumstances. They can act as a gentle overseer of their client's finances, redirecting them when they could be making better decisions and rewarding them when they do.
Setting (and Meeting) Financial Goals
Without a set financial goal, people are likely to go years simply earning money and spending it. Then, when it comes time for a significant financial decision like buying a home, they may not have the savings needed for a down payment. What's worse, a poor credit score can make mortgage loan terms prohibitive.
A financial planner can ensure that their clients have the necessary tools and resources to work toward their financial goals — and meet them.
Establishing an Investment Portfolio
Financial planners are well versed in investments. They can help clients design a tailored investment portfolio that meets their long-term objectives and tolerance for risk.
People sometimes choose to establish their own investment portfolios and select their investments based on illogical factors, such as what their friends are recommending or news trends. Personally creating an arbitrary investment portfolio often leads to lost earnings and few gains.
Winston Wealth Advisors designs custom investment portfolios based on practical investment fundamentals and value, choosing investments for their clients based on long-term growth benefits, not quick cash.
Life has inherent risks. For example, a person can lose their job, become the subject of a lawsuit, or suffer from severe injuries in a car accident. All of these risks have serious financial consequences. Although some people are lucky enough not to experience a severe personal setback in their lives, these setbacks can happen to anyone.
Planning for setbacks is an essential part of working with a financial planner. A financial advisor can help identify risks and establish preventive measures. Safeguards often involve purchasing specific insurance policies, like disability or long-term care insurance. Planning for risks is commonly overlooked, but it's necessary for preventing future financial disasters.
Obtaining Advice From Seasoned Professionals
Financial planners must have both expertise and credibility. After all, their clients confide their entire financial situations in them. They're the ones that people turn to whenever they need financial advice.
Financial planners have in-depth experience in many areas of finance, including retirement, investing, estate planning, and tax mitigation. They don't simply read a few books and declare themselves finance experts. Financial planners undergo extensive education in financial topics. Their experience allows them to offer sound advice and guidance to their clients.
Winston Wealth Advisors offers clients long-term financial planning services rooted in our comprehensive financial education, experience, and knowledge of proper financial practices.
Comprehensive financial planning is an often-overlooked resource that provides meaningful benefits. People frequently make the mistake of trying to handle everything on their own. In other cases, they seek advice from several advisors, such as accountants, tax professionals, and lawyers. However, this can result in a plan that fails to consider the big picture and all the moving pieces, and the results are disappointing.
Working with a financial planner who incorporates all of life's circumstances is essential for developing a complete set of actionable and measurable financial goals and working toward them.
At Winston Wealth Advisors, based in Dallas and Lubbock, Texas, our team of skilled professionals stands by to meet your financial planning needs. We help our clients design comprehensive financial plans, no matter their life stages. We utilize remote communication tools so we can help you wherever you are in the country. Contact us today to schedule a consultation and put your financial goals within arm's reach.