Permission to be a little nerdy today?
As a child of the 80’s, I loved watching the “A Team”! You’ve got a band of somewhat crazy military brothers who always find themselves in a tough spot. Templeton “Faceman”, “B.A.” Baracus, and “Howling Mad” Murdock were led by Colonel John “Hannibal” Smith. Queue the theme music as they pile into their black 1983 GMC Vandura with the iconic red stripe, and they were off to save the day! No matter what situation they found themselves in, Hannibal could devise a plan to make it all work out.
“I love it when a plan comes together” – Colonel John “Hannibal” Smith
Is it possible that Hannibal actually inspired me to become a financial planner? Could his cleverly-devised plans have inspired me each and every week to the extent that it helped shape my career path? OK, probably not… but, “I love it when a plan comes together”!
Let’s leave the 80’s and come back to the present. Let me answer 3 questions for you about planning for successful finances:
1. What is a financial plan?
Oddly enough, this isn’t quite as clear as you’d think. Partly because any number of people these days are claiming to be “financial advisors”. I’ve seen stock brokers, insurance agents, and mortgage brokers claim to be financial advisors. I’ll leave that for a later discussion.
The process of financial planning has changed tremendously over the past 20 years. What used to be a fairly static, linear, printed document has now become an interactive, cloud-based, dynamically-updated experience. Although the methods have changed, the desired goal remains the same. A financial plan should provide you with both clarity and empowerment.
- Clarity: By clarity, I mean you should have a good understanding of where you stand financially today. You should also have a clear understanding of where you’ll be in the future if you continue on your current course.
- Empowerment: Once you know where you are today and where you’ll be in the future, a good plan empowers you to make improvements. You become empowered to take control of your financial destiny.
From a practical standpoint, a good financial plan will help you with the following and more:
- Retirement planning
- College savings needs
- Guidance for estate planning needs
- Insurance policy analysis
- Investment portfolio development
- Cash flow needs
- Net worth improvement
- Tax reduction
For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Luke 14:28
2. Why do you need a plan?
The goal of a good financial plan is to take your family to the desired outcome in the fastest, simplest, most efficient way possible. That alone should get people lined up to create their financial plans! Consider this added benefit, however: peace-of-mind. Until you have gone through this process, you’ll be living in a world of unknowns. Will your kids be able to attend college? Will you run out of money during retirement? When is the best time to begin drawing social security? Without a good financial plan, you simply won’t know. This brings about stress, and stress is bad (most of the time). A good plan answers these questions and gets you to a point where you are fearless.
3. How do you get a plan?
You’ve stuck with me this long, and you see the value in having a financial plan. Now you’re wondering, OK, how does one obtain a quality financial plan? I’m a big DIY’er. You can research online and do just about anything on your own these days. Need to replace a heating element on your dryer? There is a step-by-step YouTube video to watch. Starting a raised garden? A quick Google search gives you everything you need to know. In fact, I’ve done both.
Personally, I don’t think financial planning is a good DIY project. You saw that coming, right? I mean, I am a financial planner, so surely I wouldn’t suggest going at it alone. I’m not saying this out of greed for new business. Financial planning is a very complex process with tons of “gotchas” that can pop up along the way. Your financial future is too important to resort to gambling on this decision. When I create a financial plan for someone, I consider things like: various income ‘burn phases’, calculate the most opportune time to take social security, adjust for inflation, select reasonable growth rates on accounts, apply Biblical screens to investment portfolios, create a priority order for income distributions, consider alternate accounts types to reduce taxes, take advantage of advanced charitable giving techniques, and more.
I’ve been at this for over 25 years now. I know WAY more now than I did in the beginning. To be honest, I know more today than I knew last year. Experience really does matter when it comes to finances. There may come a day in the future where the industry has developed enough that you can do it yourself online. We certainly aren’t there yet.
So, there you have it… YES, I do recommend hiring a professional to help create your family’s financial plan.
Plans fail for lack of counsel,but with many advisers they succeed. Proverbs 15:22
Or, if I can make up a quote for The A Team’s B.A. Baracus (played by Mr. T):
I pity the fool that doesn’t have a financial plan!