Why Do I Need A Financial Plan

6 min read
September 27, 2016


Financial Plan (1)

A few years ago, we bought a travel trailer to replace our pop-up camper since we spend a fair amount of time traveling in every season. Whether it’s driving to the KOA in the mountains or a local State Park, we take full advantage of our available weekends to be outside and to unplug.

Why do we camp when we could just stay home in the air conditioning and avoid all the effort? We could easily take one large vacation each year and call it done. So what is the driver for packing up once a month and heading out for a few days, just to unpack and put it all away?

My Dad always wanted to travel out west in a camper, as his parents did. Unfortunately, after he retired and finally had enough time and money to travel, my Mom was sick. After she passed, he was too sick himself to go. He missed out on his opportunity, so I vowed that I wouldn’t.

We want to spend fun times with our kids while they are young enough to appreciate us. We want them to remember sleeping in a puddle of water when the pop-up camper leaked, returning to a freezing cold bed after sledding all day, and eating s’mores by a warm campfire. Camping, for us, is an investment in our family. We could avoid the upkeep of the camper, storage fees and gasoline costs, but we would miss out on something that is more valuable to us - our family memories.

By now you’re probably thinking, “cool story, Pam...but what does your traveling and creating memories have to do with my finances?”

Simple. They both require a plan.

Let’s say you’ve decided to take a road trip to a beach you’ve heard great things about, but never visited. Would you just pack the car and head in the general direction of the coast, hoping that you would eventually find your way?

Of course not! You would have a plan that includes a set of directions taking you from where you are today, to the destination you are trying to reach. You might pick out attractions to visit and places to eat, and maybe even a contingency for rain. Why do you go to the time and effort? So you will have an enjoyable vacation, of course. This isn’t much different than the way you should approach your financial goals.

Therein lies the value of the financial planning process -- to help define your goals and outline the steps necessary to achieve them so you can feel comfortable with the decisions you make for your life.

That said, here are five important benefits of having a financial plan (and working on it regularly):



As you can see from the image above, the primary support structure for your financial tower is dependent on a positive relationship between your income and expenses. For many people this is accomplished by creating a budget.

Despite popular opinion, the purpose of a budget is not to force you into a life of deprivation, but rather prevent overspending and assign every dollar a destination. Once you begin telling your money what to do instead of wondering where it went, you will regain control of it.

How do you feel when things are out of control? Stressed? Helpless? Overwhelmed? Probably all of the above, right? Having a financial plan with a budget allows you to take back the reins and become the master of your money, not the other way around.


'It takes confidence to live within your means' - Sophia Bera

Having a solid financial plan in place will help you avoid worrying about what others are doing, and instead find confidence in doing your own thing. You’re able to better focus on your own goals and objectives and gauge the likelihood of achieving them rather than working to reach some arbitrary “moving target” simply because society says you should.

Part of that plan is your operating and maintenance funds. Having this money at the ready can help alleviate some of the uncertainty that accompanies making difficult decisions that involve trade-offs.

For example, owning a home or car involves a certain amount of upkeep and maintenance that you know will occur. There will come a day when the tires on your car need replacing or your washing machine goes out, and having a maintenance fund could be the difference between a minor inconvenience and a major financial disaster that derails an important goal. Preparing for these large (but expected) expenses allows you to keep working toward your goals without disrupting your finances.

Planning gives you the confidence of knowing that if something goes wrong, you have the resources available to solve the problem.


Uncertainty is a common part of most decisions -- whether financial or otherwise. Think about when you started your first job. Were you 100% certain that you would still be working in the same field 20, 30, 40 years down the road? Probably not. Choosing where to work, where to live, what to invest in and so many other life decisions involve a certain amount of ambiguity.

Some decisions are no-brainers, such as establishing life insurance or creating an estate plan. Other life opportunities, like purchasing a home or investing in a start-up, are situated at the opposite end of the spectrum and can create chaos.

Ironically, the decisions that are straightforward tend to provide you with a greater feeling of security, independent of any economic uncertainty. Take, for instance, your life and/or disability insurance. By creating a financial plan that establishes enough insurance to provide for any loss of income to you or your spouse, you can be relatively certain that your family will be financially stable in the event of death or disability. That’s a good feeling.


Having a savings and investment plan helps you increase your net worth as you work toward your long-term goals. And isn't that what you really want anyway?

Of course!

But outperforming the market is difficult, at best, and nearly impossible without a plan guided by someone with investment knowledge and a strategy that focuses on what’s important and what can be controlled. This is where the expertise of a Certified Financial Planner™ is really beneficial. According to the Vanguard Advisor’s Alpha, a concept that outlines how advisors can add value, by adding relationship-based services such as financial planning and behavioral coaching, financial advisors can help clients avoid undisciplined and emotional responses to market fluctuations.

The report contends that “Advisors, as behavioral coaches, can act as emotional circuit breakers in bull or bear markets by circumventing their clients’ tendencies to chase returns or run for cover in emotionally charged markets.” Simply stated, working with a financial planner helps you avoid knee-jerk responses to moments of panic or greed in the markets by creating suitable asset allocation strategies that align with your long-term plans. This all helps you build your capital.


One of the more interesting aspects of financial planning is that it does not end once the “plan” is completed. Instead, it is a dynamic process that requires you regularly assess your financial decisions.

For example, when an unexpected life event affects your finances, your plan is what allows you the ability to adapt to those changes. As you develop your plan and get further up the financial planning tower, you will begin to find that you have choices in life that you didn't have before. Things like deciding to pursue a passion project full-time without worrying about any negative financial repercussions.

A solid financial plan will guide you as you create your life goals, monitor those goals, and if planned correctly, will allow you endless possibilities of how you spend your time and/or money in the future. Want an idea of what a sample financial plan from Pathfinder Planning looks like? Click here to find out check out more.

This post originally appeared on Pathfinder Planning.

 PHorackProfileAbout the Author: This post originally appeared on Pathfinder Planning. Pam Horack CFP® of Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice. If you’d like to learn more about Pam, you can connect with her on Linkedin