Imagine trying to drive cross-country without a map, GPS, or even knowing your starting point. You might eventually get somewhere, but probably not where you hoped to be. That’s what handling your money without a financial plan is like. Recent data from Schwab’s 2024 Modern Wealth Survey shows only 18% of Americans feel they’re on top of their finances – that’s like less than 2 in 10 people knowing where they are on their financial road trip.
Look, the world of money isn’t getting any simpler: rising costs, inflation, political uncertainties, and new technologies that promise to significantly alter society (and the economy) mean we need to stay on top of our finances more than ever. That means you need a financial plan.
A financial plan is like having a GPS for your money, showing you where you are, where you could go, and the clearest path to get there. Plus, a financial plan will help ease those lingering anxieties about your future. Among Americans who have a written plan, 96% say they feel confident about reaching their financial goals.
The Current State of Financial Planning
Those who don’t? That’s about 36% of Americans, a number entirely too high. But why? Well, for a variety of reasons.
Common barriers to creating a plan:
The truth is, if you feel you don’t have enough money for a plan, you could actually probably really use a plan because it will provide you with a budget, a way to get out of debt, start investing, and streamline your finances so every dollar you make is working for you rather than against you. As for finding it too complicated, well, you yourself don’t actually create the plan; that’s the job of the financial planner. Finally, if you feel you don’t have enough time, again, it’s not actually you creating the plan. All it takes is probably two or three meetings, and the rest is handled by the planner. If you can’t find a few half-hour windows to help improve your financial situation, well, that choice is yours–it’s all about setting priorities.
How a Financial Plan Actually Helps
If you don’t have a financial plan, it’s difficult to understand just where you are on your financial journey, as we mentioned above. So, how does a financial plan actually help? Firstly, it creates a broad picture of your finances. All of your debts, investments, goals, and cash flow will be visible, giving you an idea of where you are and where to go next. According to recent survey data, while 32% of Americans feel they’re on track with their finances, another 34% know they need to make changes – but might not know exactly what changes to make.
You might be contributing to your 401(k), paying your bills on time, and keeping your debt low – all good things. But could your 401(k) have better investment options? Are your old retirement accounts from previous jobs sitting in high-fee funds? Do your investments align with your financial goals and milestones? Could you be taking advantage of tax-loss harvesting or backdoor Roth contributions? Do you have the right mix of tax-deferred and tax-free investments? Are you factoring in Social Security payments and Medicare premiums?
Many people don’t even know to ask these questions. But the simple fact is that having a professional look at your complete financial picture could reveal opportunities you might have missed or help you spot risks you didn’t know you were taking. After all, you don’t know what you don’t know – and in finance, what you don’t know could be costing you money and possibly even your retirement.
Components of a Comprehensive Financial Plan
So now we know why you need a plan. But what does that actually look like? At its core, you’ll find a budget that tracks your monthly cash flow, showing exactly where your money comes from and where it goes. Then there’s your investment strategy, which could include your 401(k), IRAs, brokerage accounts, and any real estate investments. Your tax strategy might involve choosing between traditional and Roth accounts, timing your investment gains and losses, and planning how to handle Required Minimum Distributions.
Financial Plan
Budget
Review income and spending patterns
Investments
Review portfolio allocation strategies
Tax Strategy
Review tax planning considerations
Retirement
Review retirement planning options
Insurance
Review coverage and policies
Estate Plan
Review estate planning documents
But that’s just the beginning. A complete plan also includes insurance coverage – life, disability, long-term care, and liability protection. There’s estate planning to make sure your assets go where you want them to, with the right beneficiary designations and legal documents in place. And tying it all together is your retirement strategy: figuring out how much you might need, where that money could come from (investments, Social Security, pensions), and how to make it last. Each piece matters because missing just one could leave a hole in your financial safety net.
In Conclusion
Money decisions don’t exist in a vacuum. Your budget affects your investments, which affects your taxes, which affects your retirement, and on it goes. Sadly, too many Americans are still trying to piece it all together alone. You wouldn’t try to be your own doctor or lawyer (hopefully!) – and your financial future deserves the same level of professional attention.
Let’s talk about where you are and where you want to go. Whether you’re just starting out or looking to refine your existing strategy, our team can help you spot opportunities and avoid pitfalls you might not even know exist. Schedule a no-obligation consultation today, and let’s explore how we could help you work toward your financial goals.
Sources:
