I was recently having dinner with a friend when she asked me a basic question about her and her husband’s financial situation. They have been saving diligently for years and she wanted to know if it was okay to put off saving for a few years in order to spend on a few large discretionary items.
The question seemed straight-forward enough. If they want to safely retire at a (relatively) young age, they’d had better save as much as possible and be careful not to dip into their savings too much. On the other hand, I thought, if they’ve been putting money away for many years, perhaps they’ve already saved enough for retirement. Wouldn’t that be nice!
Of course, without knowing anything about their financial situation I wasn’t able to answer the question. But I could lead them in the right direction with another question.
So, I asked her a simple follow-up: do you have a financial plan? Well, she said, “we have an advisor who helps us invest, but we don’t have a financial plan.”
Now, I’m not sure why one would pay an advisor who hasn’t helped you develop a financial plan. But, that’s a topic for a different day.
The point I want to make is that even a foundational financial plan would have helped answer my friend’s question. Put simply: even a basic financial plan is better than no plan at all!
A financial plan fundamentally gets you from Point A to Point B (and at a minimum, Point B is a desired retirement age with a comfortable standard of living). Planning is analogous to navigating, which is why it’s so critical. However, often couples and families are directionless because they fail to define and communicate their goals in the first place – determining what Point B looks like!
As advisors, our job is to engage our clients to start planning – what I like to think of as a process of clarity – and to help them successfully reach their goals. While our financial expertise is important, our value is often also behavioral in nature: to help clients take action.
So, the best answer I could give my friend was to take the first step. Engage an independent advisor to develop a plan. The benefits of having clarity and confidence in your financial decisions should far outweigh the costs.
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