I recently celebrated a birthday and, around the same time, had a routine physical. The combination of completing another trip around the sun and a visit to the doctor got me thinking about ways to improve my overall health further. And the more I thought about it, the more I wondered: Can a financial plan improve your health?
As it turns out, the simple answer is yes. By lowering your stress, a written financial plan can improve your physical health.
Unfortunately, according to the 2021 Schwab Modern Wealth Survey, only about a third of all Americans have a written financial plan, despite the findings that over half of the people with a written financial plan report feeling “very confident” about their financial situation as opposed to just 18% of those without a written financial plan feeling the same level of confidence.
There is no way around it: Money can be stressful and high levels of stress can lead to a variety of suboptimal health outcomes. That said, money does not have to be stressful. Many people find that they can remove the guesswork from their financial situation by creating a written financial plan, outlining where they are, where they want to go, and how they will get there. This, in turn, reduces financial anxiety and leads to a happier, healthier life.
What are the benefits of having a financial plan?
There are many tangible and intangible benefits that come from having a plan for your financial future.
First is a sense of control over your financial situation. One of the keys to living a happy, healthy, and productive life is the feeling that you are in control of your destiny. A significant amount of that sense of control comes from knowing the ins and outs of your financial situation and having a plan for the worst-case scenarios that might arise.
In addition, financial stability and financial wiggle room can give you the sense that you have a variety of options if you decide you want to move, change careers, or retire early. Having choices gives you the freedom to determine what you will do based on what is best for your life, rather than making your decisions based solely on financial limitations.
Second, having a financial plan limits the guesswork or “fear of the unknown” you might experience. As a CFP® professional that works with many clients transitioning into retirement, I can tell you that there is a big difference when someone comes to me at 65 years old and says “they think they can retire” versus someone coming to me at 65 and saying, “I know I can retire.”
This is often the difference between having a financial plan and not having one. Those with a financial plan are clear about their options for retirement and have largely eliminated the guesswork and fear of not knowing. Those without a financial plan often feel like they are a bit “stuck in the dark,” trying to feel around for the light switch without bumping into the coffee table. They aren’t confident in their ability to retire and are relying heavily on hope as a retirement strategy.
Often, when working with new clients, eliminating the fear of the unknown is where I see the most significant improvement and benefit. As we work together to assess where they are currently, clients begin to feel a better and more precise understanding of their finances. This leads to a bump in overall financial confidence.
Then, as we begin to dream, identifying where they would like to go, what their financial goals will be, and what dreams they have left to fulfill, they get another confidence boost along with excitement for the future. Ever notice how excited you get the moment you start planning that two-week vacation, even if it’s a year from now?
As we identify the tools, strategies, and financial maneuvers to get them to their ultimate goals, I see a complete shift. They now understand precisely what they need to do and why to reach their ultimate goals. That is a genuinely special moment I have with my clients—the moment that they realize they are on the right track and know what they need to do to continue.
Do I need a financial plan?
Yes, most people need a financial plan.
One of the common misconceptions is that financial plans are only necessary for the wealthy or ultra-wealthy. That is simply not true. Everyone can benefit from a financial plan, regardless of income and asset levels. That said, a financial plan will look much different for a young working family than it might look for an empty nester soon-to-be-retired couple, but each will benefit from a financial plan.
Unfortunately, many people equate a financial plan with an investment strategy, believing they don’t need a financial plan if they don’t have money to invest. However, investments are just a tiny slice of a financial plan. A financial plan covers every aspect of your financial life, from cash flow to insurance to investments, estate planning, college planning, and more.
If you are faced with competing financial priorities and need help deciding how to navigate them, which most of us are, you need a financial plan.
How do I get a financial plan?
There are many different ways to create a financial plan.
For most, working with a CFP® professional to co-craft a unique financial plan will be the best option for a couple of reasons.
First, most people are not equipped to build a financial plan on their own and will significantly benefit from the advice of an expert. Second, while it’s essential to develop a plan with action steps, one of the significant predictors of success is having an accountability partner. Many people find that accountability partner in their CFP® professional, who not only helps create the plan but walks with their clients each step of the way. One of the greatest gifts that I offer my client is that they do not need to walk their financial journey alone.
Alternatively, some may decide to create a DIY financial plan. While this can be a good option for some, most people will not have the insight, objectivity, and follow-through to do this appropriately. While a DIY financial plan is undoubtedly the lowest cost option, it likely won’t be the best outcome unless you have prior financial planning experience or expertise.
Lastly, some may choose to utilize a roboadvisor to help create a financial plan. There are a handful of different companies that offer some form of financial planning in addition to investment management. The upside is that the costs are generally low. The downside is that the plans are very high-level, like a “lite” financial plan. In addition, the recommendations are usually built for the masses rather than tailored to your unique situation. That said, for someone with a very low complexity situation, a roboadvisor may be a good fit.
I am here to help.
If you are interested in working with a CFP® professional to co-craft a financial plan, then I am here to help. As a financial advisor with over three and a half decades of experience, I take great pride in helping my clients navigate their financial journey, one step at a time.
You can schedule a complimentary call using the link below.