Financial planning: Understanding what it is – and isn’t
Finances are complicated. Gone are the days of one checking account, one savings account, and a pension for the future. People today are bombarded with advice, decisions, and complex financial products that can make planning for the future with confidence seem daunting.
Conducting focused financial planning can help organize and simplify your financial life and establish a framework to weigh big and small decisions over short and long terms. Many people have misconceptions about what financial planning actually entails. Here’s a quick rundown of what financial planning is, and isn’t, and what it can do for you.
Financial planning is a way to direct your financial future, not outsource it
Working with a financial planner is a team effort. You can lean on the expertise of a financial professional, but make sure the recommendations they offer are driven by your goals, your personal situation, and what makes you feel confident. You’re not turning over the keys. Instead, you’ll be receiving suggestions for possible courses of action tailored to you, along with guidance to help you weigh your options, and technical assistance to carry out your decisions. A financial planner should be a guide and resource, not someone who makes decisions for you.
Financial planning isn’t a set-it-and-forget-it activity
So, you met with a financial planner, set up automatic transfers to build an emergency savings, made decisions about your retirement account, and established a plan to pay down debt. You’re done, right? Unfortunately, no. Financial planning is like sailing – regular adjustments are needed to stay on course as your life and situations change. How often you should connect with your planner will vary, but at least annually and perhaps twice a year (plus an open door when you have questions or concerns) is a good start.
In a post-COVID world, financial planning is more important than ever
It’s hard to overstate how much many people’s financial lives changed during and after the pandemic. Jobs were lost and gained. Some people have new expenses, while others have fewer. Individuals who thought they would work for many more years now have a new perspective on what they want to do with their life, while others now plan to continue working after retirement. Even if you had a solid plan, now may be a good time to take stock and meet with your financial planner. They can help you think through what’s changed and what hasn’t.
Financial planning is holistic, not just picking stocks
Many people confuse financial planning with investment advice. A financial planner may have some suggestions on where to invest, but their focus is really on the bigger picture and how to help balance things like saving for retirement with emergency savings, debt management, insurance, health care costs, education savings, and other important financial considerations. They can provide tools and perspective to help you prioritize these things, and can contribute their years of experience to help you establish a plan that works for you.
Financial planning establishes options in case of setbacks or opportunity
Spoiler alert: No one knows what the future will bring. A solid financial plan will not only involve setting goals and laying out a roadmap, it will also include contingency plans for the inevitable detours. Having a plan in place for an unexpected job loss, or windfall, or even thinking through where to adjust first if interest rates or costs of living rise can help you feel more confident and enable you to act quickly when things change.
Financial plans are unique to you. A financial planner is at your side to help you make choices that will assist you in achieving your goals, not judge you. And they are there for the long haul – your need for a plan doesn’t end the day you retire. Alerus’ financial guides and advisors have the experience and expertise to help you plan for your future. Contact us today to get started.