It is no secret that a great deal of stress in life stems from financial and monetary worry. In fact, it has been found that financial stressors are the number one contributor to divorce. Many worry about financial matters daily. Some common questions we hear repeatedly from clients are: What is going on with the market? Have I lost everything? Am I going to be able to maintain my current lifestyle? Can I retire? Of course, the list goes on. However, we have found that having a financial plan in place is one of the best ways to combat financial stress. So, what exactly is a “financial plan” and how can it help reduce stress levels?
A financial plan is a roadmap for the financial future. We all have some inkling of where we are at today in terms of our finances, so a financial plan is meant to be a guide to navigate from point A (today) to point B (where we want to be in the future). The first step to creating a sound financial plan is to understand where you are at right now. What savings have you accumulated? What is the projection of your income? The next step in building a plan is to dream out loud about your financial future and to set goals. This step should be a fun part of the process. How old will you be when you retire? Do you want to travel? Will you buy a second home or downsize? The possibilities are endless, and building a financial plan gives you awareness on what you need to do today to set yourself up for the future of your dreams.
There are a couple reasons why having a financial plan in place usually reduces stress. First, if you have a plan, it makes it a lot easier to ignore daily ups and downs in the market. For example, if you see that the stock market is having a bad day, but you know that your financial plan takes into account good and bad days in the market, that should give you some comfort to allow you to sleep at night and ride out a tumultuous market environment. It has been found that the more a person checks their portfolio, the less happy (and more stressed) they are. If the daily account check can be eliminated, stress will also be reduced. Additionally, this will help you reframe your mind to have a long term versus short term focus. By not having to worry about the daily swings of the market, you can instead concentrate on meeting your long-term goals (ie: retirement). Finally, a financial plan is as close as we will probably ever get to a crystal ball. Considering buying a new home today and want to know how that affects your future? Your financial plan can tell you. Having a financial plan is a great tool to see how a decision you make today will affect your life down the road. If you know whether a decision will turn out to be good or bad in advance, you can have total confidence and peace in your decision making.
A financial plan is truly something everyone should implement, and they come in all different shapes, sizes, and colors. It is not one size fits all. If you’re just starting out, making a goal around savings is a great place to start. If you are nearing retirement, it is a great time to sit down with a financial planner to talk about the trajectory of your financial future. All in all, creating a plan will bring you clarity which can greatly reduce the common stresses felt in regard to finances.
Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Future performance of any investment or wealth management strategy, including those recommended by Balasa Dinverno Foltz LLC (BDF), may not be profitable, suitable for you, prove successful or equal historical indices. Historical indices do not reflect the deduction of transaction, custodial, investment management fees or fund fees which would diminish results. Any historical index performance figures are for comparison purposes only and client account holdings will not directly correspond to any such data. BDF clients must, in writing, advise BDF of personal, financial or investment objective changes and any restrictions desired on BDF’s services so that BDF may re-evaluate its previous recommendations and adjust its investment advisory services. BDF’s current written disclosure statement discussing advisory services and fees is available for review at www.BDFLLC.com or upon request.