Never answer a question with a question. That’s what we’ve all been taught, right? Of course, answering a question with a question is one way to frustrate someone who wants a straight answer. But, in other cases, it is quite appropriate. Case in point: Whenever I’m asked about the need for a written financial plan, I break the cardinal rule over and over again, answering that question with questions like:
What would happen to your family if you weren’t here tomorrow?
How would a serious disability injury impact you and your family?
Are you protected against catastrophic losses caused by an accident or an event of nature?
Will you be able to afford your child’s college education?
Are you paying more taxes than necessary?
When are you going or can you retire?
What does retirement look like for you?
How Much Money is Enough for Your Retirement?
Are you going to outlive your money?
Are you optimizing your investments?
How much do you want to give and to whom?
These questions, and many more, may or may not be new to you. I think we’ve all asked and considered similar questions from time to time over and over again. But I hope that by asking these questions again, a thought begins to take shape – that these questions, and their answers, vanish into thin air when not transformed into a permanent form.
Ultimately, people who don’t have a formal written financial plan actually have an informal financial plan. This informal financial plan is their historical model of financial decision-making and financial behavior. When woven together, this historic pattern of financial decision-making and financial behavior can be as difficult to change as any other habit.
The time and effort it takes to think about important issues, think deeply about them, and produce a refined written financial plan offers many lasting benefits. You can create an integrated plan that can cover risk management, college funding, tax planning, retirement planning, investment planning, and estate planning. You can clearly identify goals and objectives and improve your ability to plan for their achievement. You dramatically improve awareness of the myriad of choices available. You identify significant risks. You bring both order and discipline to your financial affairs and make informed decisions.
Most importantly, a written plan exists. It can be read over and over again as needed to deepen your engagement.
When you understand, internalize, and write down what you want to achieve, why you want to achieve it, and how and when you can achieve it, you take ownership of your financial plan. And you have also developed a powerful agent of change who can help you break the usual chains of financial decision-making and financial behavior.
With so much to gain, the answer seems clear. But, I’m going to go ahead and answer a question with a question, … Do you need a written financial plan?