Big Myths of Financial Planning

Every day, you make choices about your finances that affect your long-term happiness. But if you are like most people, you never had any formal education in money management. You’ve had to seek out advice and resources as you go. And unless you’ve been very lucky, you’ve found it contradictory or downright nonsensical.

Let’s debunk some misconceptions and call out some questionable advice.

1. Myth: You don’t need a plan because too much changes anyway. Actually, a plan simplifies things by keeping you on track, showing you the steps you need to be taking. You can adjust it as your financial and family circumstances change.
2. Myth: A financial plan is just a budget. Yes, a budget is helpful in tracking your spending and savings habits. But a financial plan encompasses savings, spending, income, housing, insurance, estate plans, and retirement. A financial plan, in fact, can help you fine-tune your budget.
3. Myth: Debt is always bad. Debt can be constructive to building net worth and reaching your financial goals. Debt acts as an enabler of wealth creation when you use it to finance important purchases of appreciating assets, such as a home. And education loans, used prudently, can help you advance your career and earn a higher salary.
4. Myth: My financial planner will take care of everything. A good financial planner can be invaluable, but to get the most out of the relationship, you need to involve yourself and talk knowledgeably with your financial planner about your goals and risk tolerance.
5. Myth: Financial planning is only for the wealthy. It’s for everyone! If you earn an income, manage expenses, or are responsible for your family’s finances, you need financial planning.
6. Myth: Financial planning is really all about investment management. Taking charge of investments is only one part of financial planning. The financial planning process is not only about stock picking. It is also about taking a bird’s-eye view of your future and setting goals.
7. Myth: All financial planners are the same, so I can just pick one at random. Financial planners differ widely regarding their philosophies and the way they work. But one thing all good financial planners have in common is that they are transparent. They will be open about their methods and professional affiliations.
8. Myth: Financial planners all charge the same way. There are in fact multiple ways financial planners can charge. Some earn a commission on products they sell you, while others work for a percentage of the money they have under management. And still others will charge a flat or hourly fee based on the complexity of what they provide. Again, transparency is key here: Competent and honest financial planners with be upfront about their fees.

Taking charge

Financial planning can seem complicated, but you can reach your goals by taking it step by step. To get started, keep your tax records and know from where you can download your bank and investment statements online. Then prepare to start fresh and take charge of your financial future. Let us know how we can help you.

Do you have questions?

You can count on Ericson, Scalise & Mangan, PC to provide you with sound guidance and experience in these uncertain times. For assistance with your legal needs, please contact us today at (860)854-3809, or email us at info@esmlaw.com.