Money Myths Series: Myth #4 – Financial Planning is Only About Investments


What comes to mind when you think about financial planning?

Stocks, bonds, mutual funds?

Although Wall Street is hyperfocused on investments as the most important aspect of your money, financial planning involves so much more. Honestly, the most important part of a person’s financial plan has nothing to do with money at all!

Proper financial planning begins and ends with you. It’s focused on your goals, your dreams, your aspirations, passions, and loved ones.

Yes, money is necessary. But, it’s merely the tool you need to accomplish your goals.

If you don’t know what your goals are, how do you know how much money you need to accomplish them?


Goals first, money second.


And even when you’re clear about your goals and how much they cost, the conversation is never about investments alone. In fact, there are five fundamental financial pillars that comprise your financial life, and all of them require your attention.


The 5 Pillars of Financial Planning



When it comes to creating a comprehensive financial plan there are five components that you need to consider.


Tax planning is about looking to the future to ensure you aren’t paying more than your fair share of taxes. Effective tax planning for retirement begins now, not when you’re already retired and it’s too late.


Estate planning

Estate planning ensures you leave your wealth to the people you love and the causes that are most important to you. It also enables you to control how you are physically and financially cared for as you age.


Cash flow and debt management

Managing your paycheck, building an emergency fund, and keeping your debt and spending under control are critical money management skills you need when building a stress-free financial life.


Risk management

Having the proper insurance in place protects you and your family and provides peace of mind. A good financial plan should address all of your insurance needs – life, disability, long-term care, homeowners, auto, medical, and others. You should know if you have the right amount of insurance, and if you are paying too much or paying for something you don’t need.


Goals-based investing

Goals-based investing helps ensure you keep your investment objectives front and center at all times. It is “investing with purpose,” as opposed to investing to achieve the highest rate of return.


How to Start Planning for Your Financial Future 


If you’re like most people, you’re used to seeing the five financial pillars as isolated bits. Because of this, we tend to deal with each pillar as a separate issue, either going it alone or calling on multiple professionals in different offices who each only focus on their small piece of the pie.

This makes financial planning way more complicated than it needs to be. The good news, it’s not necessary to take this segregated approach to financial planning.



A Simple Start to Financial Planning


Financial planning happens in two steps:

      • Having clear goals
      • Addressing all five financial pillars in an integrated way


The first step is to start with your goals. Ask yourself questions like:

      • What am I passionate about?
      • What kind of retirement do I want?
      • Do I want to travel?
      • Do I want to help pay for my children’s education?
      • Do I want to buy a sailboat and sail into the sunset?

Don’t hold back when you think about your goals. Really allow yourself to dream.

Our dreams and goals are our motivation for building wealth. Without a clearly defined vision of the future, it’s hard to stay on track when it comes to saving, investing, and paying off debt.


The second step is to look at the five pillars of your financial life. Ask yourself:

      • Do I have the appropriate professional support for each pillar?
      • Do these professionals talk to each other?
      • Is each pillar part of a cohesive financial plan that is specifically designed to support my goals?

At this point, it’s okay if you don’t have all of the answers. Not having all of the answers means it’s time to get the help you need so you can make a financial plan that will help you achieve your goals and dreams.


Financial Planning is So Much More Than Investments


Creating a comprehensive financial plan involves so much more than investing. Whether you have a financial plan in place, or you’re just starting to think about your financial future, make sure you consider each of the five pillars to ensure you cover all of your bases.

We find that it helps to put pen to paper when creating your plan, so feel free to use the table provided below to begin working through the five pillars.

Wishing you happy planning!