Financial planning misconceptions and why having a plan is important for you

Finance 101

A man and women meeting with a financial advisor in her office

When it comes to financial planning, there are some common misconceptions that prevent people from realizing just how important it really is. For example, it's commonly perceived that financial planning is only for the extremely wealthy, not necessary for people in simple situations, or only applicable for major life events such as getting married or having a baby. These statements are not always true. At John Hancock, we offer different planning packages tailored to individual needs, and they start at $250. Unfortunately, these misconceptions discourage a lot of people from seeking the financial planning help they need. There’s so much more to a financial plan than you think. There are many planning options out there and I cannot stress enough the importance of having a financial plan in place as something to ground and guide you financially.

If something has been holding you back from building a plan, consider these reasons why financial planning is so important for you:

It looks at the big picture:

Creating a financial plan allows you to see the big picture of your finances. We often base how we’re doing financially on our checking or savings account balances, but this only provides a limited view into what our finances look like and oftentimes, it can be discouraging. Seeing your true net-worth statement is a more meaningful measure, and something a financial planner will help you analyze. For example, you may have paid down your student loans, increased your retirement savings, or followed your budget which is something to be celebrated.

It gets you organized:

Do you know where your previous employer 401(k) plans are located now? Do you know where that copy of your Will went? Getting your finances organized is half of the battle. While it may be daunting and require some upfront work, financial planning will get you organized and is well worth it. Plus, your family will thank you.

You can set and measure goals:

Setting your goals is an important part of the financial planning process. When working with a financial planner, they can help you establish your short and long-term goals and prioritize them, so you know what path to take to achieve them. Knowing what your goals are and having an endgame makes following your plan easier. With each goal that is completed, even if you start off small, you can build up your confidence and start to feel better about your finances.

You’ll avoid making bad decisions:

It can be difficult to make informed, rational decisions when a situation arrives that requires finding a quick solution. If you were to lose your job, for example, or have an unplanned large expense, it’s helpful to have an emergency plan in place for you to follow rather than rushing to a solution and potentially making a decision that does not optimize your finances. Additionally, when you don’t know your current situation and aren’t working towards any goals, it’s all too easy to splurge on something you may not need and in the process, sacrifice your financial security. With a financial plan, you’ll know your budget, which will help prevent you from making impulse decisions like buying new clothes you don’t need or booking a trip you can’t afford.

You can get custom solutions:

Financial planning is far from one-size-fits-all. Each individual or couple’s situation is different than the next, and most financial plans can be tailored to meet your unique needs. For example, you might have a need for budgeting and cash flow assistance, but are all set with your investments because you enjoy managing them on your own. Someone else may be approaching retirement and want to have a plan around that, but they feel comfortable with everything else. Financial planning doesn’t have to be holistic. You can find financial planning options that are tailored to meet your needs, or that target a specific area of need if you have a main topic of concern (i.e. education planning, insurance needs, budgeting, etc.).

It’s professional, unbiased guidance you can rely on:

Considering money and finances can be an emotional topic, especially for couples where there may be differing opinions on the subject, it can be helpful to work with an unbiased third party. A financial planner can act as a mediator in these tough discussions. Plus, you can feel confident about your plan because you know it was done by a licensed professional. That’s the kind of reassurance everyone wants and needs.

Admitting you need help or want a second opinion on your finances can be difficult, but there is no shame in getting assistance with what’s easily one of the most important aspects of your life. Keep in mind that financial health, just like physical health, does not happen overnight. It also may not be the easiest journey, but regardless of your financial situation, change is possible and it’s never too late to start a plan. Don’t let the cost of financial planning steer you away either. More and more reasonably priced financial planning options are becoming available, so after some research you should be able to find something that fits your needs and your budget.

At John Hancock, we offer a variety of financial planning packages, so you can easily find one that works for you. Meeting with a financial planner is a great first step towards building confidence in your financial future. Don’t hesitate to reach out to the Advice team to get started planning today!

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