Never answer a question with a question. That’s what we’ve all been taught, isn’t it? Of course, answering a question with a question is a way to frustrate someone who wants a straight answer. But, in other cases, it is quite appropriate. Case in point: Whenever I’m asked if it’s necessary to have a written financial plan, I break the cardinal rule over and over again, answering that question with questions such as:
What would happen to your family if you weren’t here tomorrow?
What impact would a serious disabling injury have on you and your family?
Are you protected against catastrophic loss caused by an accident or natural event?
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 to you?
How much money is enough for your retirement?
Will you outlive your money?
Are you maximizing your investments?
How much do you want to offer 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, my hope is that by asking these questions again, a thought will begin to take shape – that these questions, and their answers, will 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 historical 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 ponder important issues, ponder them deeply, and produce a polished written financial plan provides 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 greatly enhance awareness of the myriad of choices available. You identify the 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, if needed, deepening 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 own your financial plan. And, you have also developed a powerful agent of change that can help you break the shackles of habitual 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?