Financial planning should provide the framework for your overall investment strategy and is a key first step in making sure that you are on track as you pursue your financial goals. However, according to a recent study, only 36% of Americans have a written financial plan in place.¹ If this is so important, then why do so few people have a financial plan in place?

When a new client comes to us, we review their entire financial picture. When doing so, there is typically one thing that we find in common: there is no comprehensive plan in place. Sure, they may have some investments, but how do they fit into their long-term goals?

The answer to our opening question: Most people confuse simply having an investment portfolio with financial planning.

When your investment plan seems to be doing well, you may not put too much thought into questioning your portfolio or how it relates to the bigger picture. It’s important to understand that performance doesn’t mean very much without perspective of your risk exposure. Are you taking enough risk to pursue the goals that you have in place? Or are you taking too much risk, such that a market downturn could derail your plans? It is easy to create an aggressive or conservative portfolio, but at the end of the day, what is most important is understanding your investment plan is designed to work specifically toward the objectives you have in place.

When meeting with a new client, we often see clients’ investments spread among several different financial institutions.

One question that we may ask: “What is your process for overseeing all of your accounts to ensure they are working together toward your goals?”

And the typical answer: “We don’t have a process.”

This is another reason having a financial plan is important. It can help you wrap your arms around your entire financial situation while providing a process designed to make it easier to manage as you enter different phases of your life.

Most of our clients are working toward multiple goals – getting ready for retirement, funding a child’s college education, buying a second home, paying down debt, leaving a legacy, among so many others. Sitting down and making a comprehensive financial plan is a way to find balance in how to pursue multiple goals.

Another thing that new clients typically need help reviewing is their life, disability, and long-term care insurance. The first step as we go through their financial plan is to determine how much coverage is needed to protect their family. We then identify the type of coverage that is necessary. And if they have existing coverage, we assess whether it is cost effective compared to other solutions that are available. We find that it makes most sense to evaluate insurance in tandem with a financial plan.

Some important parts of financial planning are taking into consideration tax and estate planning matters. As financial advisors, we are frequently coordinating with clients’ CPAs and attorneys, as many decisions to be made may have tax and legal implications. By helping to ensure that all professionals are on the same page, we can help set clients on course for pursuing the most ideal outcomes along the way of their financial planning journey.

As life goes on, you will experience many events that could have significant implications on your financial plan (getting married, buying a house, receiving an inheritance, losing a spouse, transitioning to retirement, etc.). We remind our clients that, as we go through different stages of life, we want to make sure that our financial plan is evolving with us along the way.

Do you have a comprehensive financial plan in place? Or do you just have an investment portfolio and hope that it gets you where you need to go. Hope is not a good strategy for your finances or your retirement. If you feel like you would like a complimentary review of your situation, give the Kletschke Wealth Management Group a call. We would love the opportunity to meet with you.