There is a popular adage often attributed to Benjamin Franklin, the father of time management, “Failing to plan is planning to fail.”
I think a lot of people believe that financial planning is only for the wealthy — which may be true, but only for a lot of financial planners. Before I left my last broker dealer, I saw how much pressure advisors were under to only take on clients who met certain minimums. In many firms, you need to be bringing a minimum of $250,000 of assets to invest in order for them to take you on (or take you seriously).
That, to me, is bordering on criminal. Many times the people who most need some financial advice are those who haven’t made their fortune yet!
6 areas of financial planning
The fact is, financial planning can be super helpful for anyone, in a lot of different areas of finance. Share on X In fact, there are 6 areas:
Financial Foundation — This includes building a cash reserve, understanding your cash flow and debt.
Risk Management — Just a fancy name for insurance needs. (Hint: You need insurance to cover anything you couldn’t easily replace if it disappeared tomorrow — including you.)
Goal Planning — Do you want to save for a big financial thing, like a home, retirement, college? Gotta make a plan.
Investment Planning — Essentially what money to put where to get the best bang for your buck in the long term while reducing volatility for the money you need right now.
Tax Planning — Most planners aren’t tax preparers, but we can chat about strategies for tax savings. It’s OK for Uncle Sam to take his fair share, but no more than that!
Estate Planning — Planners can’t give legal advice, like how to draw up your will, but we’re usually the one who gets the “what if I die” conversation going.
It’s all connected
Quick story: I went to a party where we visited a puzzle room. If you’ve never been, it’s a room full of puzzles to solve and when you solve them, you get a piece of a picture to assemble – when the picture is complete, the door unlocks and you go into the next level or room. Ideally, your party is big enough that small groups of people can work on individual puzzles simultaneously, to save time. The person who threw the party told me, after we were done that I was the most valuable player…she said she had seen me multiple times walking up to a group of people and pointing out the critical thing they were missing to solve the puzzle.
I am by no means a genius, but I think being a financial planner trained me to see connections where other people might not. And to that point, the biggest mistake I see people make is that they don’t look at all of their financial areas as being connected.
Maybe someone is focused on paying down debt, but they are forgetting they need to set aside money for that big wedding they are in six months from now. Or someone is contributing to 401k savings… but they don’t know what those savings actually translate to, 10–30 years from now, or whether they’re saving enough.
And while we’re at it, let’s clear up some other major misconceptions:
“Financial planning is ‘just’ for retirement.” You can clearly see, it’s not. Plenty of the financial planning I see has to do with how to juggle short term cash flow needs with goals coming up in the next 3–5 years (buying a home, funding a wedding, having kids, etc.).
“The CFPⓇ is the only standard.” I think my CFPⓇ (Certified Financial PlannerⓇ practitioner) is valuable because you seriously have to slog through (and pass) several tests to get the certification. And, the CFPⓇ board requires continuing education to maintain the certification as well as acts as an ethical oversight group for everyone who has earned the certification. However…I have met plenty of people without CFPⓇs who have tons of experience (and are ethical). So the CFPⓇ should just be one filter of several when selecting your financial professional.
“Financial planning is ‘just’ about investments.” This might be just me, but I have no interest in investments until I understand a client’s bigger picture and long-term vision. Until I understand those, investments have no meaning. You can’t design an investment portfolio responsibly until you have some idea of what the money might be used for.
“Financial planning is ‘just’ about products.” Because it’s so common for financial professionals to sell mutual funds, insurance, mortgages and other financial products, people start to think that any financial issue you have can simply be solved by buying a product. Nope.
Do you need a financial planner?
I think the perfect way for a person to decide if they need financial planning is to look at these 6 areas of financial planning and ask yourself, what clarity do I need in these areas to know whether or not I am on track?
That’s why I designed a Financial Clarity Worksheet, which you can get in my library of free resources in addition to a lot of other stuff.
And if you find that you’d like to get some help, information, or clarity in any of the six areas — or with how they fit together to make a complete financial picture for you — then meeting with a financial planner might be a great idea for you.
