3 Core Behaviors Creating a Financial Plan Can Support

The amount of money you have set aside for retirement can make you feel either secure and happy, or nervous and fearful — or more likely, a shifting mix of these and other emotions.

For some people, their emotional relationship with their money is so powerful and complex that they’re unsure what their best path is, and may end up practically paralyzed. That in itself can be a mistake, because they may be missing out on their best chance to influence their own future.

By creating a financial plan in coordination with a financial advisor, however, you and your significant other can continue making the right decisions for your future, even when you might otherwise feel as if you’re on an emotional rollercoaster. Among other things, a good financial plan will detail the sorts of investments you’ll make, the types and levels of insurance you need, and the type of legacy you will leave.

At its heart, one of the most important things your plan does is keep you aligned with several core strategies that will keep you on course, no matter what happens. Let’s look at three of these essential strategies.

1. Understand and define your financial goals.

In the hustle and bustle of day-to-day living, it’s hard to step back and really think about your long-term financial goals. You may have a vague hope that you can retire at a relatively young age, for example, or that you can help pay the costs of your children’s education. But it’s quite another thing to put numbers and timelines around those aspirations. When creating a financial plan with a financial advisor, defining goals is one of the earliest and most central steps, and helps to clarify all other considerations. The financial advisor will help you not only go through the process of articulating goals, but also helping you see the reality of your current financial situation. The advisor will then develop concrete recommendations to help you achieve your goals — ranging from what actions to take regarding insurance and retirement planning to decisions about your children’s education, legacy planning and more.

2. Mitigate your risks.

While a major part of a financial plan focuses on investing money to be used for retirement or other purposes, another central focus is on minimizing risk. Perhaps the most obvious type of financial risk is of the unexpected death of a spouse. All too often, if the deceased spouse were a wage earner, their surviving spouse faces not only the emotional pain of their death but potentially, a host of other financial problems and challenges. Your financial advisor can assess the level of income that needs to be replaced in the event of either spouse’s death, and will work to help you obtain the necessary coverage.

Another category of risk a financial plan can help you avoid is that of bad decisions. For example, it’s not uncommon for people who are nearing retirement age to worry that they haven’t saved enough money. Unless they’re getting good advice, they may be tempted to take drastic measures — for example, by making dubious investments with the hope that they can quickly “catch up” on their retirement savings. Such a strategy is understandable, but it could potentially jeopardize their savings at a time when they no longer have enough time to recover from market corrections.

3. Stay focused.

Ideally, your financial plan is looking ahead years — even decades — based on your and your family’s needs, desires, and existing financial picture. Because of the uncertain and dynamic quality of life in general, your plan needs to be revisited at least once a year to evaluate and make any necessary adjustments.

In these periodic assessment meetings, you’ll want to discuss, at the very least, any changes that have taken place since your last review, either in your income, expenses, or vision for the future. The process of meeting and evaluation also reinforces your plan’s underlying strategies, and helps ensure that everyone involved stays focused in order to reach your shared goals.

With a strategic foundation, almost anything is possible

By building your financial plan on sound strategies such as these, your financial advisor can help you plan for the best — but be prepared for the worst. Of course, these strategies are only the beginning, and there are many more practical and personal strategies your advisor will share with you as well.

By talking through your hopes and needs, you will enable your financial advisor to create a comprehensive financial plan. In doing so, you can take a great deal of chance out of the equation — and instead, take greater ownership over your financial future. Creating a financial plan can be a huge gain in peace of mind‚ not only for you and your spouse, but also for your entire family.

 

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