Whether your New Year’s resolution was to get your finances in order or you just want to be smart about how you spend and save money, financial planning is key. Financial planning can seem like a scary word filled with accounting jargon and insider knowledge that only rich people can access.
But the reality is that financial planning is something that everyone needs, regardless of income level or current financial situation. When you break it down, financial planning isn’t as scary as it sounds, and once you understand the benefits of having a plan in place, it’s not something that seems so scary after all. We know getting your finances in order can seem daunting, but these seven myths about financial planning might just help!
Myths About Financial Planning
You need to be rich to benefit from financial planning.
Financial planning is something that can benefit anyone, no matter what your current income level is, what your job is, or what your current financial situation is. A financial plan can help you identify your current financial standing, set goals based on your current situation and where you want to be in the future, and help you create a path to get there.
This can include everything from where you currently invest your money and how much you need to save for retirement to how much debt you have and how much you can afford to spend each month on things like housing, groceries, and gas.
Financial planning is like making a road map for your future. It helps you determine how much you’ll need to save each month in order to reach your goals and how much you can expect to pay for certain things, like a car loan or mortgage, if you’re planning to buy a house. It can also help you decide whether to take a risk with your money by investing it in the stock market, or to play it safe with a more conservative approach to your investment strategy and Myths About Financial Planning
Financial advisors are only available through banks.
This is false. You can work with a financial advisor who works for a bank, but you can also work with an advisor who is independent and will work with you from a place of fiduciary responsibility. A fiduciary is someone who is legally responsible for managing your money in your best interest. This means that they won’t sell you any products or services that aren’t in your best interest, and they’ll never be paid based on the products that they sell you.
Banks are required to have their customers sign a suitability form, which means they have to sign a form that says they believe the product that they’re selling is suitable based on your circumstances and future goals. This isn’t the same thing as a fiduciary responsibility, which is more stringent and protects your best interests, not the bank’s.
Financial planning is only for older people.
Definitely not! Financial planning should start as soon as you start earning money. It’s also important to start planning for things like retirement as early as possible. Financial planning isn’t just about saving for retirement, though that’s definitely a part of it, but it’s also about protecting your assets, like paying off debt, making sure you’re getting the most out of your paycheck, and determining how much you can afford to be spending each month.
Even if you’re in your 20s or 30s and don’t feel like you have a lot of money or a ton of assets, it’s important to start planning now, before you have a ton of debt and kids and a house payment to pay each month. Even if you don’t have a lot now, if you start planning now, you’ll be in a much better spot financially as you get older and have more responsibilities.
Financial advisors will cost you a lot of money.
While there are plenty of financial advisors out there who charge a monthly fee, the best financial planners are fee-only planners who charge based on the work they do for you, not the products they sell you. If an advisor charges you a percentage of your assets, or suggests that you invest in products that pay them a fee instead of being in low or no-fee products, run as fast as you can.
Good financial planners charge either an hourly rate or a percentage of the amount of money they manage for you as a percentage of your assets. If they charge an hourly rate, it means they only get paid when they work for you, which is a good thing. If they charge a percentage of your assets, it means that they get paid by managing your money, which is also a good thing because they’re getting paid to do work for you.
You’ll know exactly what your future will look like after financial planning.
While financial planning can help you figure out how much you need to save for retirement and what your expenses will be in the future, it won’t necessarily tell you exactly what your future will look like. Financial planning helps you determine what your expenses will be, how much you’ll need to save for retirement, and the best path to get there.
It doesn’t predict what the future will bring, or how the broader economy will affect your finances. For example, if you have a five-year plan to save money for a house, financial planning can help you determine how much to save each month and what your current financial situation is. But it won’t tell you what real estate prices will be in five years. It also won’t tell you what will happen if there is another housing crisis.
Financial planning doesn’t help in determining your investing strategy.
You might think that financial planning is only useful for figuring out how much you need to save for retirement and what your current financial situation is. But it can also be used to help you determine the best investing strategy.
An investing strategy is how you invest your money, whether that’s in the stock market or in more conservative investments like bonds or CDs. If you’re planning on investing your money, financial planning can help you determine the best way to invest your money. It can also help you determine how much risk you can afford to take on with your investing strategy.
You don’t need a financial plan to protect your assets during bankruptcy.
This isn’t true! Even if you file for bankruptcy, you should still have a financial plan in place. Financial planning can help you get your finances in order and determine the best path forward. It can also help you determine how much you need to save for retirement, how much you can afford to spend each month, and how much debt you can afford to pay off.
Financial planning doesn’t replace the need to speak to a lawyer or the need to go through the bankruptcy process, but it can help you determine how to best protect your assets. It can also help you determine how much you need to save for retirement and how much debt you should be paying off.
Conclusion
Whether your New Year’s resolution was to get your finances in order or you just want to be smart about how you spend and save money, financial planning is key. Financial planning can seem like a scary word filled with accounting jargon and insider knowledge that only rich people can access.
If you break it down, financial planning isn’t as scary as it sounds and once you understand the benefits of having a plan in place, it’s not something that seems so scary after all. We know getting your finances in order can seem daunting, but these seven myths about financial planning might just help! Myths About Financial Planning