Financial Planning

Why aren’t more people confident about their financial plans?

7th September 2020

The Author: Craig Gardner
Craig works in the Madrid office as a Financial Planner and is responsible for helping clients make better financial decisions.

In a 2019 NBC News readers poll about personal money management, 31% of respondents revealed they do not feel confident about their financial plan. Having looked at similar studies, we discovered that this lack of confidence isn’t restricted to one generation: it cuts across them all, from boomers to millennials and generation X.

In this post, we delve into some possible reasons for this lack of confidence and what you can do about developing your own financial plan if you haven’t already.

Lack of detailed understanding 

Many people are often afraid to admit that a key reason why they don’t feel confident about their financial plan is because they don’t understand certain aspects about money and financial planning.

Finance can be confusing, even intimidating, and it takes valuable time to research the right savings plans and investment options. When financial information is explained clearly and in a way that is meaningful to your situation, you are much more likely to trust it and act on it.

While educating yourself about money management is a necessary part of financial planning, it’s often hard to find the time to actually do it.

A trustworthy financial planner has the time to explain things in a way that makes sense so you can make informed decisions to create and enjoy your wealth, now and in the future.

Taking the first step is often the hardest

The first step in developing a financial plan – and having more confidence in your financial future – is to set clear goals. You need to think about how you want to live your life in the future without compromising how you live now.

Consider milestones in your life, such as your ideal retirement age and where you would like to live when you are no longer working. Think of them as your lifestyle goals and retirement goals and incorporate them in your financial plan as short-term and long-term goals.

Aligning your financial plan with your goals

A personal financial plan is just that: it’s personal to your situation. Broad based financial goals can help, such as save more and spend less. However, the numbers and importance attached to those figures differ greatly for everyone.

For example, are you an empty nester who may actually need to spend more and save less? Or perhaps your immediate goals don’t revolve around saving but rather clearing debt.

It might be about strengthening your position, or about investing in a higher risk portfolio now that your base investments have been built and are providing solid returns. The most important thing is to prioritise your goals and align your financial decisions with those goals.

Finding an accountability partner

We all know that we will struggle to achieve our fitness goals by simply signing up for a gym membership. It’s the commitment to working out that will help us achieve our health goals. Even then, it’s not always easy to motivate yourself to get to the gym. We often need a personal trainer to keep us accountable.

The same principle applies to developing and following a financial plan: financial advisers act as accountability partners for your financial goals. They will tell you what you need to hear, not want you want to hear. Based on that, they will give you their experienced opinion and guidance for sticking to your financial plan to meet your goals.

Developing a financial plan that works for you

Like any goal, fitness or otherwise, there is no point trying to shoehorn into someone else’s lifestyle. You may love spending and have no desire to change that, so it might be about developing a plan that lets you continue to live in the way you want.

The important thing to keep in mind is that a financial plan shouldn’t make you miserable. Rather, it should make you excited about your financial future while you remain happy about your current situation.

How a financial planner can help

A qualified and reputable financial planner will ask you a lot of questions, some of which are uncomfortable to answer.

Questions such as:

  • Why do I have certain opinions about money?
  • Who do I want to spend time with?
  • What kind of legacy do I want to leave?
  • Who do I feel financial responsibility towards?
  • How would I feel if I failed in that responsibility?
  • Could I be happy on a reduced income?

There’s a good reasonwhy financial planners ask the tough questions and hold your feet to the fire: when you are honest and take stock of your financial situation, you are in a position to make reasoned decisions about your present and future.

Our Lifestyle Financial Planning guide will take you through the key parts of the planning process and our team is available to answer any questions you may have along the way.

LFP guide download