The idea that financial planning is only for the rich is one of the more pervasive money myths.
It’s easy to believe because the concept of “financial planning” or having a “financial planner” can come off as a bit elitist. You might think, “if I don’t have a lot of money, what’s there to financially plan?” This misinterpretation of “financial planning” enables this myth to persist.
Let’s examine it more closely.
What is Financial Planning?
When you hear the words “financial planning,” what comes to mind? Can you define it? Can you identify the tasks involved in creating a financial plan?
“Financial planning” is the process for making smart decisions with your money so you can achieve your life goals.
This is something everyone should do. Following a process to “make smart decisions with your money” isn’t reserved just for the rich.
It’s not about having the most money; instead, it’s about making the most of the money you have. It’s about using your money as a tool to support your values and goals so you can achieve your vision of success.
Still not convinced?
Your Net Worth is Not a Reflection of Your Self-Worth
Ask yourself this — how much wealth do you need to go on a hike? Swim in a lake? Watch a free family movie at the local park? Go to the library and borrow a book? Take a walk with your best friend? Bake cookies with your kids or grandkids?
The truth is you are more than the sum total of your bank accounts, whether that’s a lot or a little.
The concept of financial planning is confusing because many financial professionals only work with rich people. This reinforces the myth that only rich people deserve the security and freedom that comes from quality financial planning.
Don’t let this discourage you. You don’t need to work with a financial professional to be financially secure. You can plan your finances, cultivate your money, and live a full, rewarding, and successful life without having a million dollars in your investment portfolio.
Let’s be clear,your net worth is not a reflection of your self-worth. Never let anyone tell you or lead you to believe otherwise!
What to Consider in your Financial Plan
If you want to start making smart decisions with your money so you can achieve your life goals, what should you consider?
Where Do You Want to Go?
Proper planning starts with knowing where you are going.
If you’re familiar with Dr. Stephen Covey’s seminal work, 7 Habits of Highly Effective People, this is habit #2 – “Begin with the end in mind.”
People often create their plan without first knowing where they’re going. Don’t make this mistake. Instead, start with the fun part — where you want to go.
What are your financial goals? What are your dreams? Do you want to retire somewhere sunny, take your family on vacation regularly, or pay off those pesky student loans?
This is the time to get real with yourself. What do you really want out of life? What things stir your soul? What do you want your days to look like when you’re older? Who do you want to spend your time with? Envision the possibilities — and write them down!
You Are Here
To get to where you want to go, you need to know where you are.
Start your financial planning with a review of your assets and debts. Assets include things like your home, car, and retirement savings. Debts include your mortgage, car payments, credit cards, or student loans.
Make an inventory of your assets and debts. This will give you a clearer understanding of your net worth. This is the jumping-off point you need to start planning for your financial future.
Now it’s time to take action. How are you going to get from where you are now to where you want to go? How are you going to save, invest, and pay off debt? How are you going to achieve your retirement goals?
Do you have an emergency fund?
Do you have the right amount and types of insurance in place?
Do you have a will?
Financial planning is not just about saving and investing. A good financial plan is one that is comprehensive and covers all areas of your financial life.
When it comes to executing your financial plan, you can go it alone, or you can reach out to a financial professional. If you want support from a financial professional, make sure you look for someone with reputable credentials such as a CFP(R) (Certified Financial Planner).
Financial Planning is for Everyone
Whether you have $10 or $10 million in your bank, everyone should have a financial plan. Financial planning is not just about how to invest your money, it’s about planning every aspect of your financial present and future so you can reach your life goals.
On a final note, please remember – your self-worth is not a reflection of your net worth. Money is not what defines you. It is a tool to be used to help you achieve your goals, dreams, and aspirations.
Don’t wait. Create your financial plan today — your future self with thank you!