Why Financial Planning is Needed by EveryoneSubmitted by Davenport Watts & Drake Investment Advisors, LLC on September 21st, 2016
It wasn’t long ago that financial planning was thought of as a discipline that only applied to the very wealthy. If you consider the fact that just a few decades ago, the average life expectancy was just 70 years, few people were concerned with making their retirement income last long. And, back then, the majority of retirees were supported by the three-legged stool of Social Security, personal savings, and guaranteed pensions.
Much has changed in the last 15 years that has extended the need for financial planning to anyone hoping to achieve their goals and secure their financial future. Consider how our financial world has evolved:
- Life expectancy took a huge leap in the last twenty years with average life spans increasing to 85 years and an increasing number of people living into their 90s.
- Guaranteed pension plans have become virtually extinct.
- Health care costs have more than doubled over the last few decades threatening to consume as much as one third of a retiree’s income.
- The near vertical trajectory of the stock market of the 1980s and 90s has become, to many people, a sadistic roller coaster ride they would rather not have to stomach.
- The proliferation of investment products and providers over the last couple of decades has created too many choices which have led to confusion and investment paralysis.
- Current and future generations will spend an additional 15 years on average caring for family members – a child with financial problems, an aging parent, or both.
- College tuition continues to climb out of the reach of many American families.
- Over the last twenty years, the Internal Revenue Code has arguably become one of the most complex in the world.
Of course, these developments as well as the ongoing evolution of the financial world affect all of us, not just the very wealthy. A comprehensive, well-coordinated financial plan needs to be able to address all of your needs and concerns and do so in a way that allows you to achieve financial peace of mind.
No one plans to fail, but until deliberate steps are taken to clearly define your goals, assess your current financial situation, and implement actionable strategies towards achieving your goals, you will have failed to plan. That can be devastating at a time when the stakes have never been higher.
The financial planning process enables you to focus clearly on your specific goals while addressing every concern so they are no longer obstacles. And, having a well-conceived, comprehensive financial plan enables you to shut out the constant drone of doom and gloom, because your plan addresses your objectives for the long-term. And that is all that matters.