Humans are hard-wired to make emotional money decisions. Often, your choices don’t align with your best interests. Have you ever spent too much money during a sale? Or, have you sold investments during a market downturn? You may know the sting of irrational money moves all too well.
One way to cut back on these types of missteps is by working with a financial advisor.
The benefits of financial planning may include more confidence, stability, and peace of mind. If you’re eager to learn more about the benefits of having a financial plan—we’ve got you covered.
What are the benefits of having a financial plan?
Financial planning isn’t only for affluent families or couples nearing retirement. You aren’t “too young” or “too broke” for financial advice, either. There are many benefits of financial planning for folks at all levels of income and savings.
A comprehensive financial plan includes taking a look at your family’s situation. After an in-depth analysis, a financial advisor can share your biggest financial shortfalls.
For example, they may uncover your family’s lack of disability insurance. Or, they may point out you are paying too much for investment fees. They may also see you have children and no estate planning documents in place.
Based on mutually-agreed upon goals, together you can focus on which areas to improve. You will agree on who handles what and revisit your goals often. One of the biggest benefits of having a financial plan is being able to make changes over time.
What your financial plan may include
Now that you know the benefits of having a financial plan, you may be curious what yours may include.
Every financial plan looks different.
Depending on your family’s needs, you may be looking for advice in only a few areas. Or, you may prefer a comprehensive financial plan for all areas of your financial life.
A comprehensive plan may include—but isn’t limited to—analysis and advice in these areas:
- Cash flow and budgeting
- Education planning
- Insurance and risk management
- Employee benefits
- Tax planning
- Retirement planning
- Estate planning
How much does a financial plan cost?
For many people, the benefits of financial planning outweigh the costs.
But the total expense will depend on many factors. You may pay more depending on where you live, the type of advisor, the scope of advice they provide, and more. Your out-of-pocket costs for financial planning may range from “free” to thousands of dollars per year.
These are the basic fee structures you can expect to see:
- Commission-based – Commission-based advisors receive a fee from selling their clients a product. This may include products like annuities, life insurance, or mutual funds.
- Fee-only – Fee-only advisors don’t accept any type of commissions. Instead, they offer financial planning for a fee. You may see either a flat fee, hourly rates, or a percentage based on how much money they manage—a.k.a. “assets under management.”
- Fee-based – Fee-based advisors charge a fee for their services, but also receive commissions for products.
Build awareness of your family’s situation
Whether you choose to do-it-yourself or hire a professional, there are clear benefits of having a financial plan. You are a lot more likely to achieve stability and to reach your family’s most pressing financial goals.
You might not feel comfortable or ready to work with a financial advisor. But that’s no excuse to ignore your family’s finances.
By subtracting your total debt from total assets, you will know your net worth. It’s a bird’s eye view of your current situation—and how it may change over time.
Once you have a feel for your family’s cash flow, you can look at bigger financial goals. Buying a home, saving for college and retirement, or investing may feel like too much to tackle alone. At that point, the benefits of financial planning—and an unbiased third party—may be worth the added expense.