Life rarely follows a perfectly planned path. You may start your career with one set of goals, only to see your priorities change when you get married, buy a home, have children, change careers, or begin thinking seriously about retirement.
Your finances change along the way, too.
Yet many people approach money one decision at a time. They save when they can, contribute to a retirement account, purchase insurance, pay down debt, and make investment decisions without considering how those choices work together.
Financial planning takes a different approach. It looks at where you are today, where you want to go, and what financial decisions may help you get there.
What Is Financial Planning?
Financial planning is the process of reviewing your current financial situation, identifying your goals, and creating a strategy to work toward them.
It can include many areas of your finances, such as:
- Retirement planning
- Investment planning
- Estate planning
- Tax planning
- Cash flow and budgeting (present financial position)
- Protection planning
The purpose is not simply to create a budget or choose investments. Instead, financial planning looks at how your financial decisions relate to one another.
For example, deciding how much to contribute to retirement may affect how much money you have available to pay down debt or save for another goal. An investment decision could have tax consequences. Changes to your income could affect your savings goals and insurance needs.
Financial planning brings those conversations together.
Financial Planning Is Also Life Planning
Money touches many of the decisions we make throughout our lives. That is why financial planning and life planning are often closely connected.
Think about some of the questions you may ask yourself over the years.
When can I afford to buy a house? Can I help my children pay for college? What would happen financially if I could not work? When could I retire? How much money will I need in retirement? What do I want to leave to my family?
These may sound like financial questions, but they are also questions about the life you want to build.
A financial plan gives you a place to consider those goals alongside the financial choices that may support them. Your plan can also change as your life does.
The goals you had at age 30 may look very different at 45 or 60. A financial plan should account for those changes rather than assuming your priorities will always stay the same.
Do I Really Need a Financial Planner?
You can make financial decisions without working with a financial planner. In fact, many people start by managing their finances on their own or turning to people they trust for advice. When seeking financial advice, 43% of U.S. adults turn to friends and family, while 41% turn to financial advisers and planners.
But as your financial life becomes more complex, professional guidance can take on a larger role. You might have several retirement accounts from different employers, own a business, receive an inheritance, or need to decide when to retire. You may be balancing college savings with retirement contributions or wondering how taxes could affect your plans.
A financial planner brings professional knowledge and a broader perspective to these conversations. Rather than looking at one question at a time, your planner can help you see how decisions about saving, investing, taxes, insurance, and retirement may affect one another.
Perhaps most importantly, a financial planner can help connect your money decisions to your personal goals. Friends and family may offer valuable support and share their own experiences, but a financial planner can evaluate your individual financial picture and help you build a strategy around where you are now and where you want to go.
What Are the Benefits of Financial Planning?
The financial planning benefits can extend far beyond having a written plan. Planning can influence how you approach money decisions throughout different stages of your life.
Gain a Better Understanding of Your Finances
It can be difficult to make informed decisions when you do not have a complete picture of your finances.
Financial planning begins by looking at what you own, what you owe, what you earn, and where your money goes. That information can help you see where you currently stand and identify areas that may need attention.
Turn Goals Into Action
Saying you want to retire someday is different from creating a plan for retirement.
The same is true for paying off debt, buying a home, building savings, or leaving an inheritance. Financial planning helps turn broad ideas into specific goals and then connects those goals with actions.
That could mean determining how much you need to save, reviewing your investment strategy, reconsidering your spending, or addressing another part of your financial picture.
Prepare for Life Changes
Some changes are planned. Others arrive unexpectedly.
Marriage, divorce, children, career changes, inheritances, retirement, and the death of a loved one can all affect your finances. A financial plan gives you a framework for reviewing what has changed and deciding what may need to happen next.
You do not have to start over every time life changes. Instead, you can revisit your existing plan and make adjustments based on your new circumstances.
See How Different Decisions Connect
One of the biggest advantages of financial planning is the opportunity to look beyond individual decisions.
Your taxes, investments, retirement plans, insurance, savings, and estate plans do not exist separately. A change in one area may affect another.
Looking at these areas together can help you understand the trade-offs involved before making a decision.
Spend More Time Thinking About What Money Is For
It is easy to become focused on account balances, investment returns, tax bills, and monthly expenses. Those numbers matter, but they are only part of the conversation.
Financial planning can also help you think about what you want your money to accomplish.
Maybe you want to retire early enough to travel. Perhaps you want to help your children or grandchildren with education. You might want to give more to organizations you care about or leave something meaningful to your family.
Your financial plan can connect the numbers to those larger goals.
When Should You Start Financial Planning?
Although earlier is often best, there is no single age or financial milestone when everyone needs to start planning.
You also do not need to wait until you have accumulated a certain amount of money. Financial planning can help whenever you want more direction around your finances and future goals.
Certain moments may prompt you to take a closer look. Starting a new career, getting married, becoming a parent, purchasing a home, receiving an inheritance, approaching retirement, or starting a business can all raise new financial questions.
You may also decide to start simply because you are tired of making financial decisions without a larger strategy.
The earlier you begin thinking about your goals, the more time you may have to work toward them. But financial planning can provide value at many stages of life.
Your Financial Plan Should Change Along With Your Life
Creating a financial plan does not mean deciding today exactly what your life will look like decades from now.
Plans change because people change.
Your income may rise or fall. Your family may grow. Your career may take an unexpected turn. Your priorities may shift. Goals that once mattered greatly to you may become less important, while new goals take their place.
Financial planning gives you a way to respond to those changes while continuing to look ahead.
At Korhorn Financial Group, financial planning is designed around both short-term and long-term goals, with plans that can evolve as a client’s life changes. If you are beginning to think about how your finances fit into the life you want to build, a conversation with the Korhorn Financial Group team can help you consider what your next steps might look like. Contact us to get started.
