Street$marts: Here’s why you need a financial plan

Billy Cooper, CFP®, Financial Planner

Now this is a pretty loaded topic as there are benefits to all aspects of financial planning whether it be investment planning, estate planning, budgeting and debt management, or tax planning, and many other things – I would say the greatest benefit to putting together a financial plan is that it effectively acts as a road map to achieving each of your individual goals.

Let me give you a couple examples of goals that we help our clients achieve through financial planning. First, we’ll start with a young working professional that’s 30 or 40 years from retirement. Has a good job that pays well, but still has a significant amount of student loan debt, maybe some credit card debt, and is also thinking about starting a fund to buy a house in the future. While tackling two goals of reducing debt and saving for a down payment on a house might not seem like a lot, but when you put it into context for someone that also pays rent, has a phone bill, health insurance, groceries, and also wants to enjoy going out with friends on the weekends or travelling a bit, this is actually pretty daunting without a plan. So what our team would do is walk through each aspect of our client’s financial circumstance and bring it all together to paint a picture of the client’s current path and then formulate a step by step plan by identifying points of improvement. And sometimes its the most miniscule things that can make a difference… even just cutting back that $3.65 coffee at Starbucks every morning could save you over $100 a month to put toward a credit card or student loans. So, with a financial plan, we can help a client like this get their debt under control while also having enough to split between saving for a down payment on a new home, putting money away early for retirement, and still have some money left over to go out and enjoy their life.

Now let’s shift to someone that’s about to retire, has done a great job saving throughout their working years, but is afraid of transitioning from the accumulation phase to the preservation and distribution phases. This client really wants to know that despite not bringing in a monthly paycheck they can rely on their savings or their “nest egg” to cover where their retirement income sources like a pension or Social Security falls short. And they want to know that when the market declines, they won’t lose all their years of hard work. At Howe & Rusling, our financial planning team will formulate a plan that pairs what we call your income goal, which is really what you want to spend in retirement, with an appropriate asset allocation that provides you with the income you need to supplement your other income sources while also reducing market risk so you can sleep well at night. Though sometimes we need to see it to believe it. So, another great part about financial planning is we can provide a visual representation of what the plan would look like under a simulated bear market of varying lengths and how that might impact the client’s retirement. And helping our clients through the Coronavirus pandemic has been an excellent example. Our financial planning team has taken pride in being there for our clients through this difficult time by providing them with a comforting tool through either a visual confirmation that despite a difficult market environment they are still on track to achieve their goals or an alternate recommendation to get them back on track.

And lastly, let’s now talk about a client that has been enjoying the retirement party for a few years, and has been able to get a strong handle on what their income requirement looks like but now wants to know if they can afford a second home somewhere warm, or the opposite and wants a ski house somewhere out west maybe. Our financial planning team at Howe & Rusling can help this client through the entire process, beginning with first, determining what they can afford. Then comparing options like purchasing the home in all cash or financing the home. And maybe they decide they want to finance the home – how does a 15-year mortgage impact their retirement goal vs a 30-year mortgage? Our modeling capabilities are nearly endless, and we really do enjoy helping our clients navigate all the intricacies that come with retirement.

So, I can’t stress this enough, the number one reason to have a financial plan is to have a long-term road map. After all, each piece of your financial picture, such as your salary, your debts, or your investment portfolio, is most important when considered as a part of your OVERALL financial plan. Therefore, the plan acts as a great tool for keeping a long-term perspective and being able to make small adjustments along the way to right the course if need be. Whether you are in your prime working years in your thirties or forties, or you’re an experienced retiree looking to see how your next move may impact your overall goal, financial planning can help you get to where you want to be.

If you are interested in beginning the financial planning process, our team at Howe & Rusling would be delighted to work with you.

More Street$marts

Get the latest content from Beyond the Bell