Carnegie Investment Counsel Blog

Creating Your Roadmap: What Is the Importance of a Financial Plan?

Posted by Carnegie Investment Counsel on Sep 1, 2022 2:00:00 PM

Creating a Roadmap

A financial plan is a personalized roadmap to help you meet your financial goals. While there’s a long list of reasons why a financial plan is so important these are the top five.


1. Align Your Values and Your Spending

Every good financial plan should include a budget. Plenty of people mistakenly associate budgets with deprivation, but in reality, a budget simply aligns your values and your spending. If you value quality family time, you may budget more for family vacations. If you value a flexible schedule, you may create a budget that allows you to retire early. 

The reason a budget is necessary and so essential is because on a day-to-day basis we often fail to align our values with our purchases. For example, maybe we see an expensive new gadget we want. Without a long-term financial plan there’s little reason not to make the purchase, other than a vague notion that you’re spending a lot of money. On the other hand, if you know you’re saving for something specific, say a family vacation, you now have a concrete reason not to make an expensive, unnecessary purchase.  

Schwab MoneyWise has a free budget-making tool to help you get started.


2. Improve Financial Habits

We often think of our finances in terms of our biggest purchases, and while these are important, it’s often the smaller day-to-day financial habits that make or break us. The example of a daily $5 cup of coffee may be cliché at this point, but it exists for a reason. Unless you win the lottery, it’s unlikely a healthy financial life is something you’ll fall into overnight. Far more often, it’s the product of your daily habits. But you can’t know if your habits are helping or hurting you if you don’t know what they are. This is where a financial plan and a budget can provide a huge amount of value. 

Ponder your daily recurring expenses. Be honest with yourself; is there an opportunity to save? A financial plan lays out your finances, making your current financial status and your financial habits incredibly clear.


3. Increase Savings

Though every financial plan is unique, almost every financial plan includes savings goals. These goals, which are a clear factor in the importance of a financial plan, could range from saving for a new car to providing for the next generation. If you struggle to save at all or save as much as you want to, the good news is that a financial plan makes it considerably easier. Once you have a financial plan, you’ll know exactly what you’re saving for, how to save for it and why you’re saving for it. You’ll also have the peace of mind to know you’re on track to reach your goals.


4. Prepare for Major Milestones

When you create a financial plan, you’ll first determine your major financial goals and then create a path to meet them. For example, how much will you need to retire? This is a difficult question because there is no one size fits all answer, but it’s also an incredibly important one since you can’t save for retirement without knowing how much you’ll need. No matter your age, the sooner you can create a financial plan, the better shape you’ll be in to handle major milestones. Get thinking about major life milestones with this short-list:

  • Purchasing a home
  • Getting married
  • Having children
  • Parenting milestones, such as sending children to college, paying for a child’s wedding, etc.
  • Starting a business
  • Saving for retirement

Know if your retirement savings are on track with this free retirement calculator from Charles Schwab.


5. Limit Financial Stress

Last but certainly not least, a financial plan can decrease financial stress. If you have a budget, you never have to wonder if you can afford to make a purchase or not: You know for sure one way or another. You’ll know how much you need to save to reach your goals, when you can expect to retire and so much more. The uncertainty that can cause so much stress around your finances is no longer an issue when you have a financial plan. And it’s hard to overemphasize the importance of limiting financial stress. 

In a study of more than 19,000 Americans, 60 percent reported “feeling anxious when thinking about their personal finances." And that anxiety can impact other aspects of your life. For example, financial stress is a leading cause of divorce.


Still Wondering About the Importance of a Financial Plan?

If you don’t have a financial plan, now is that time to create one. Contact us to schedule a consultation with our experts today. 


Need a Financial Advisor?

If you are currently looking for help with financial planning, contact us. We are happy to schedule an introductory meeting at your convenience.

Book an Appointment


Topics: Financial Planning

Carnegie Investment Counsel

Written by Carnegie Investment Counsel

Carnegie Investment Counsel is an Registered Investment Adviser (RIA) providing personalized financial guidance to help you preserve and grow your wealth, so you are freer to enjoy your life. As your fiduciary, we are obligated to place your investing success ahead of our returns.

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