Financial Planning
As a CERTIFIED FINANCIAL PLANNERTM practitioner, I often meet with individuals and couples who have expressed an interest in reviewing their overall financial health. When I ask those folks if they’ve ever put a financial plan in place, the same response comes back time and time again: we don’t have a written plan, but we’ve got a general idea of what we need to do.
The reality is, an informal plan is not a plan at all. Simply contributing to your company’s 401(k) or making the maximum allowable contribution to your IRA accounts on an annual basis will not ensure the ability to retire at age 60, or even 65 – and live the next twenty, thirty or forty years in a relative state of comfort.
In fact, most people who retire do so with at least some level of discomfort – primarily attributable to the fact that they don’t know if what they’ve accumulated during their working years will be enough to sustain them for the rest of their lives. The true measure of an adequate financial plan is whether it addresses – in detail – exactly what a person will need to contribute on an annual basis to meet all of his or her financial goals. These goals may be long-term (such as retirement), short-term (such as adding an extension to the home) or something in between (such as saving for a child’s education.) But in every instance, the amount of money that will need to be set aside for each goal will depend on a couple of key factors: the length of time available for saving, and the manner in which the assets intended to fund the goal will be invested.
A plan must also account for other contingencies. For example, what if the primary breadwinner in a household dies, leaving behind a spouse and two small children? How much life insurance is necessary to ensure that the remaining family members can continue the standard of living to which they’ve become accustomed? Will the surviving spouse return to work, and if so, who will care for the children during the day? And what will the cost of that care amount to?
If you would like to explore the financial planning concept in greater detail, please feel free to contact me by completing the contact form accessible via the "Location" hyperlink above.