When do you need a financial plan?

Anders Skagerberg
Range Certified Financial Planner
Range Certified Financial Planner
March 28, 2022

While you may understand the importance of having a financial plan, deciding when you need one is not always so clear. Often, people delay creating a financial plan because they either assume they don’t have enough money or believe it’s just too complex.

In fact, according to Charles Schwab’s 2021 Modern Wealth Survey, only about a third of Americans have a written financial plan. And when asked why they don’t have a financial plan, 42% of people said it’s because they don’t think they have enough money to merit a formal plan, while 22% reported that it is too complicated, and 19% said they simply don’t have the time.

Unfortunately, this causes many Americans to put off planning for another day, leading to increased financial stress and poor financial outcomes. But the question remains: how do you know when you need a financial plan? Read on to find out.

5 reasons to consider setting up a financial plan.

  1. You have financial goals, hopes, or dreams.
  2. A financial plan can be essential if you have financial goals or aspirations. That’s because a financial plan allows you to list out all of your financial goals and helps you draft a roadmap to get there.
  3. Notably, in the 2021 Schwab survey, over half of those who had a written financial plan reported feeling “very confident” about reaching their financial goals. Alternatively, only 18% had the same level of confidence in reaching their financial goals without a plan.
  4. A good financial plan contains various aspects of your financial life, from investing for retirement to monthly budgeting and even risk management in the form of insurance. Each of these essential aspects of your financial plan impacts your ability to reach your financial goals, so a well-written plan will include specific action steps you can take in each area to reach your goals while helping you prioritize those steps to create the biggest impact now.
  5. You are earning an income.
  6. If you are earning money, then a financial plan may be worthwhile. That’s because regardless of your income, you must make decisions with your money. For example, should you be saving for retirement or paying off your student loans? What about your child’s college fund—how much should you be saving there?
  7. A financial plan is simply a map that can help you figure out where you should put your money to reach your financial goals.
  8. At a high level, a financial plan can help you prioritize what to do with your money when you have competing priorities. For example, while you may want to save for retirement, pay off your student loans, and buy a house, you may not have enough money to do all three. Having a financial plan outlining what is most important to you and why will help you decide where your money should be going, no matter your income.
  9. You are experiencing OR expecting a significant change or life transition.
  10. Whether we like it or not, life is constantly shifting and changing. Some of these changes are expected, like deciding to get married, have a child, or change careers, while others can come out of nowhere, like the death of a loved one, an unexpected divorce, or disability.
  11. A financial plan can be critical during these life transitions, helping you understand how these changes will impact your financial goals and helping you know exactly what to do next.
  12. While there’s no limit to what life can offer, some common changes include:
  13. Lifestyle changes: getting married or divorced,having or adopting a child, buying a home, or moving.
  14. Career changes: getting promoted, changing jobs or careers, getting laid off, or starting a business.
  15. Health changes: death of a loved one, injury, disability, or illness.
  16. While everyone will experience different transitions and changes throughout their life, most will experience at least some of the transitions above. Having a financial plan in place or crafting a financial plan during one of these life transitions can be a critical step towards achieving your financial goals, despite life's curveballs.
  17. You have others depending on you.
  18. Having a written financial plan becomes critical when others are depending on you. A well-written plan will help you plan for potential worst case scenarios, and help provide income for your dependents and loved ones if you were to pass away.
  19. For example, a financial plan can help you decide how much life insurance you would need to replace your income if you were to pass away. That is a critical step towards ensuring your children, spouse, or dependent parents will be okay if something happens to you. Your plan will also detail how much of an emergency fund to have on hand—a great step towards protecting your family from financial emergencies, such as an unexpected job loss or car repair.
  20. In addition, a critical aspect of every financial plan is creating an estate plan. If you have children then this is essential as you will decide who would care for your minor children if you and your spouse were to pass away.
  21. While it may be difficult to think about, having these documents and plans in place before something happens is critical, and will help provide financial support for your loved ones and ensure your final wishes are carried out.
  22. You feel lost, unorganized, or stressed about money.
  23. 72% of Americans report feeling stressed about money at least sometime in the prior month—that’s according to the APA’s Stress in America survey. Unfortunately, financial stress is shown to lead to poor financial decision-making, creating a negative snowball effect where financial stress causes additional financial stress.
  24. One way to break out of this vicious cycle is to create a financial plan. This allows you to zoom out of the day-to-day financial decision-making and begin making decisions that will benefit you now, and in the future.
  25. In the end, while many believe they don’t have enough money to need a financial plan, the truth is that most people need and would benefit from a financial plan. When it comes to creating a financial plan, keep in mind that often the key is just to get started today.
  26. Choose one aspect of your financial life like investing, retirement, budgeting, or estate planning, and start there. It does not need to be perfect from day one, and it will take time to do it all, but every step gets you closer to reaching your ultimate financial goals.

Range is here to help.

With Range, you can connect all your finances into a single dashboard to track, monitor and plan the best version of your life. Say goodbye to middlemen and spreadsheets and hello to the new financial you.

Get started with Range today

Book a Demo
Explore More