In its 2024 Modern Wealth Study, brokerage firm Charles Schwab & Co. asked some 1200 Americans to grade themselves regarding a few personal finance questions. Over a third of all respondents gave themselves a grade of D or F on the level of savings they’ve accumulated and on their preparedness for retirement. Interestingly the grades were better among those with a financial plan, where less than 15% berated themselves so poorly. (See https://pressroom.aboutschwab.com/press-releases/press-release/2024/Schwab-Survey-Reveals-That-Americans-Think-It-Takes-2.5-Million-to-Be-Considered-Wealthy-in-2024/default.aspx).

This does not come as a surprise to me.

A financial plan is a document that details a person’s current financial circumstances, their short and long-term financial goals, and their strategies to achieve those goals. It can help them plan for income and spending, debt reduction, and even the costs of managing life’s health and disability risks.

Suppose you inherit some money or receive a bonus at work. What should you do with the cash?  Invest it? Take a vacation? Remodel the house? A retirement plan creates a context in which you can take into account any future tradeoffs that may be required as a consequence of whatever decision you make today. When you know what the future impact is likely to be, you’ll feel more comfortable with your financial decision-making. Without a plan, the best you can do is to hope your choices today don’t leave you in poverty when you’re too old to be able to do anything about it. 

A client of mine wanted to spend money on some expensive worldwide travel for herself and her family one summer. “I’m tired of scrimping. I want to enjoy my money now,” she told me. The financial plan we had previously completed for her allowed her to identify and choose what to give up during her retirement for this trip. Surprisingly it was future travel that she chose to forego. “I’ll probably be too tired then to do it anyway!” she joked during our meeting. Having the plan empowered her to make a tradeoff decision that she felt good about. And when she takes her trip she won’t be worried about whether or not it was a good decision or whether or not she’ll still have enough money for retirement afterwards. She’ll know it was a good decision because she made it with full knowledge of the ramifications.

Of course there are many different ways of building a financial plan. You can do it yourself using spreadsheets, or you can utilize the software that many brokerage firms make available on their websites for simple estimates of how long your money might last. If you’re looking for software that not only helps with tradeoff decisions but also alternative scenario comparisons and multiple stress tests for success likelihood, you might consider hiring a CFP® Professional. Most have access to sophisticated software that can do all these things. You can find more information about this at https://www.letsmakeaplan.org/.

Keep in mind that any plan dealing with future expectations is loaded with assumptions and goals that are likely to change as you journey through your future. Nonetheless, having a financial plan puts you much more in control of your financial future.  What better way to achieve peace of mind?

(PERIGON is a registered investment adviser. More information about the firm can be found in its Form ADV Part 2, which is available upon request by calling 877-977-2555 or by emailing compliance@perigonwealth.com).