Do you picture yourself owning a new home, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached.
That's where financial planning comes in. Financial planning is a process that can help you target your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.
Why is financial planning important?
A comprehensive financial plan serves as a framework for organizing the pieces of your financial picture. With a financial plan in place, you'll be better able to focus on your goals and understand what it will take to reach them.
One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related. For instance, it can help you understand how saving for your children's college education might impact your ability to save for retirement. Then you can use the information you've gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you'll know that your financial life is headed in the right direction.
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6 Reasons to Use Professional Financial Services
Creating and implementing a comprehensive financial plan generally involves working with professionals that can help you manage all aspects of your financial health. If you’re thinking of doing it yourself, you may be missing out on the following benefits.
1. Your advice will always be personalized.
It’s no secret that there’s a wealth of information out there on the internet nowadays. A lot of it is good! But a lot of it is also bad— and it can be hard to discern which is which.
While these sources can be good for sparking ideas and getting paperwork together, it is usually best to use a professional for the best personalized advice. Everyone's financial situation is different, and what works for someone isn't necessarily going to work for you. Using a professional can help make those distinctions and work out a plan that works best for your unique circumstances.
A professional advisor can develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities, and evaluating your insurance coverage, investment portfolio, tax exposure, and estate plan.
2. A professional can help you reach your specific goals.
Along the same lines, working with a financial services professional means that you can cater your strategies to your wants and needs. Common financial goals include:
- Saving and investing for retirement
- Saving and investing for college
- Establishing an emergency fund
- Providing for your family in the event of your death
- Minimizing income or estate taxes
But not everyone places the same emphasis on the same things. You may want to save for a house and be able to take a big family vacation every year while your friend may be more concerned with leaving a large inheritance behind for their children. Your advisor or investor will be able to help you establish and prioritize financial goals and time frames for achieving these goals.
3. They can help you navigate changes in your life.
The only thing that never changes is that things change. In your life, you may need help navigating the financial aspects and repercussions of major life events. How you spend, save, and invest your money may change drastically if you:
- Get married and merge finances with your spouse
- Have children
- Go through a divorce
- Are involved in an accident or find yourself facing costly health problems
- Take on the care of an aging family member
A financial professional can monitor your plan and help you navigate these changes to keep you on track. If circumstances change, they can help you make adjustments to your goals, time frames, or overall strategy.
4. Financial service professionals do more than just investments.
There’s a common misconception that the goal of professional financial planning just is to help you invest in the stock market. While this will likely be part of your strategy, the value goes far beyond that. In fact, the financial planning process can involve a number of professionals.
Financial planners typically play a central role in the process, focusing on your overall financial plan, and often coordinating the activities of other professionals who have expertise in specific areas.
Accountants or tax attorneys provide advice on federal and state tax issues.
Estate planning attorneys help you plan your estate and give advice on transferring and managing your assets before and after your death.
Insurance professionals evaluate insurance needs and recommend appropriate products and strategies.
Investment advisors provide advice about investment options and asset allocation and can help you plan a strategy to manage your investment portfolio.
5. They can help you stay on track.
The financial planning process doesn't end once your initial plan has been created. Your plan should generally be reviewed at least once a year to make sure that it's up-to-date. It's also possible that you'll need to modify your plan due to changes in your personal circumstances or the economy. Even if you don’t experience a major life event like marriage, divorce, or death, there are some of the events that might trigger a review of your financial plan:
- Your goals or time horizons change
- You have a specific or immediate financial planning need (e.g., drafting a will, managing a distribution from a retirement account, paying long-term care expenses)
- Your income or expenses substantially increase or decrease
- Your portfolio hasn't performed as expected
- You're affected by changes to the economy or tax laws
It can be easy to invest your money and forget about it. Financial planners can help you stay on top of it and recognize situations that may affect your money.
6. They have your best interests in mind.
Lastly, the right financial service professionals will have your best interests at heart. For instance, registered investment advisors (RIAs) have a fiduciary duty to their clients, which means RIAs are required to ensure that investment advice is accurate to the best of their knowledge, keep efficiency and cost in mind when executing trades, and disclose if there is a conflict of interest.
There are a ton of self-proclaimed “advisors” out there that are hoping to take advantage of consumers and make a quick buck. Opting to work with registered financial professionals ensures that you’re working with people motivated by helping others achieve financial success.
Common Questions About Financial Planning
If you’ve never worked with a professional financial advisor or planner, you may have a few questions.
What if I'm too busy?
Working with a professional can actually cut down on the amount of work you have to do. Don't wait until you're in the middle of a financial crisis before beginning the planning process. The sooner you start, the more options you may have.
Is the financial planning process complicated?
Each financial plan is tailored to the needs of the individual, so how complicated the process will depend on your individual circumstances. But no matter what type of help you need, a financial professional will work hard to make the process as easy as possible and will gladly answer all of your questions.
What if my spouse and I disagree?
A financial professional is trained to listen to your concerns, identify any underlying issues, and help you find common ground.
Can I still control my own finances?
Financial planning professionals make recommendations, not decisions. You retain control over your finances. Recommendations will be based on your needs, values, goals, and time frames. You decide which recommendations to follow, then work with a financial professional to implement them.
The Bottom Line
Working with a financial service professional can streamline your overall financial strategy and get you on track to meet your goals. While there are more opportunities than ever before to learn the financial ropes yourself, you can always rest assured that a professional financial advisor will be able to craft a plan that will best meet your financial wants and needs.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer Member FINRA/SIPC and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.