Financial Planning: What it is & why it’s important (A simple & in-depth guide)

financial planning
Financial Planning | Whether you're saving for tuition, your wedding expenses, planning for retirement, or another goal, this guide can change your life.

Getting Started with Financial Planning

In this financial planning article, I’m going to show you everything you need to know to get started with a financial plan. Here is what we’ll cover:
• What is financial planning
• Why it’s important to plan your finances
• The best resources (apps) to plan better for free

Whether you’re trying to save for your children’s college tuition fund, getting ready for your wedding expenses, planning for retirement, or any other financial goal, this guide can change your life. You’ll learn the basics of planning intelligently and setting yourself up for massive success.

The Fundamentals: What is a financial plan?

A financial plan is a comprehensive statement of an individual’s long-term objectives for surviving and thriving financially. It’s a detailed budgeting and investing strategy.
A financial plan may be created independently or with the help of a certified financial planner.

According to The Associated Press-NORC Center for Public Affairs Research, two-thirds of Americans would find it difficult to get $1,000 in an emergency.

Before you go ahead and start downloading the latest mobile and web app (which we will get into later in this article), let’s go through our time-tested methods. Afterwards, and we’ll get into the ins and outs of how to move forward with creating plans for your financial future.

And the best thing about all of this (in addition to reaching financial freedom and having peace of mind):

You can apply the principles in this guide to planning for any type of goal (not just financial): personal or professional.

A financial plan is a comprehensive statement of an individual’s long-term objectives for surviving and thriving financially. It’s a detailed budgeting and investing strategy. 

A financial plan may be created independently or with the help of a certified financial planner. 

According to The Associated Press-NORC Center for Public Affairs Research, two-thirds of Americans would find it difficult to get $1,000 in an emergency.

Before you go ahead and start downloading the latest mobile and web app (which we will get into later in this article), let’s go through our time-tested methods. Afterwards, and we’ll get into the ins and outs of how to move forward with creating plans for your financial future.

And the best thing about all of this (in addition to reaching financial freedom and having peace of mind):

You can apply the principles in this guide to planning for any type of goal (not just financial): personal or professional.

While most people know they need a financial plan, many most do not have a plan. And even fewer have a great plan that works. According to research by Charles Schwab in the Modern Wealth Index, Americans give the following reasons for not having a better financial plan:

  • 46% say they don’t have sufficient money to demand a financial plan.
  • 13% say they don’t have adequate time to create a financial plan.
  • 18% say it seems too complex to make a financial plan.

The most talented athletes in the world, including Olympic athletes, prioritizes plans. If you rely on your plan, as an Olympian relies on his/her training plan, your finances will perform better. So get ready for your journey to your financial Olympics: the best performance you’re capable of achieving. 

Here are some other interesting statistics:

So hats off to you for reading this article and trying to improve your financial future.

Let’s keep going.

Mastering the Fundamentals of Financial Planning

Mastering the fundamentals of financial planning might be the #1 key to maximizing your fiscal fitness in the game of life.

It’s important to remember these core principles:

  1. No cookie-cutter plans. A financial plan is NOT just simply syncing with your phone, tablet, or desktop, and hoping Siri figures out your finances. While we don’t have any problem with Siri, we do know that generic and cookie-cutter strategies will never scratch the surface of your true monetary potential. 
  2. Custom plans work better.A custom financial plan laser-focused on your lifestyle that’s designed, monitored, and adjusted properly is the way to the top. We’ve had conversations with many extremely wealthy people. We advise them on their finances. And we’ve been fortunate to learn all about their good and not-so-good habits. 

Nearly every one of the wealthiest people we’ve ever worked with believes in a custom plan. Most super-wealthy people do not rely on generic strategies. So… this guide should serve as a resource to begin to improve your custom plan. It’s not plug-and-play. That rarely works. We’re just giving you a framework to build on. If you need help actually creating plan, we’re glad to help you with that too.

There's more to financial planning than just planning.

So you may be thinking: are you saying that a great plan is all I need to become wealthy? No. Of course not. I am saying that without a great financial plan, you’ve got no shot of maximizing your wealth.

A Simple Step-By-Step Process: Creating your custom plan

How do I start a Financial Plan?

  1. Assess. Assess your current financial health: Start by committing yourself to address your financial health with your best effort. Through a laserlike focus on your financial health, you can break through the obstacles that have held you back from optimizing your financial health. And don’t say you don’t have obstacles. We all do. The question is: will you learn from them? 
  2. Embrace the details (and areas to improve). With this assessment step, it’s crucial you dig deep and analyze everything. Be detail-oriented. Look for any and all bottlenecks. Search for negatives. Because it’s through our weaknesses that we can learn the most. But… you must be willing to admit them and grow from the less you learn. This guide can’t do this for you. You and only you can do that for you.
  3. Compile & mark it up. Now, you are ready to dedicate your time and energy into compiling and organizing your numbers. Go print out your statements. Grab a highlighter. Mark it up. Circle. Underline. Drawn mind maps. Make lists. Prioritize. Look at trends. Write, edit, repeat.
  4. Get super organized. If you are not financially fit, this may be extra challenging to confront. But if you’re crushing your biggest financial goals it’s easier to look at how you and your loved ones are surging ahead towards the financial success you’ve always dreamed about. Regardless, everyone that makes a lot of profit has to do this.
  5. Track. Track your spending. Not only your income. Write down everything you spend for a specific amount of time. By writing down what you spend, you’ll start to recognize bad habits that hold you back. You’ll also notice great habits that you can focus on increasing. 

Why is a financial plan important?

Sacrificing the quality of your planning process is a matter of life and death. Life or death? Yes, that’s right. Sounds extreme and dark right? Yes, it is. But it’ll be worse for you and your loved ones if you don’t plan well.

A great financial plan can also be the master key that opens the kingdom of your wildest dreams. And this is not about the materialistic stuff. This is about real life. Financial health and wellness are non-negotiable.

Great financial planning is hard work.

It’s not as simple as just printing out your bank’s automated financial plan. If it was, you probably wouldn’t be reading this right now. You’d be on your yacht in San Tropez. Also, the statistics above would probably not exist if it were easy. If simply downloading a financial software was all you needed to do, you would be earning dividends like Warren Buffet.

Creating a custom financial plan helps you see the big picture. With a clear vision for your financial health, you can set long and short-term life goals. This is a crucial step in mapping out your financial future. Vision and then goals. Not the other way around. You can’t create a roadmap if you don’t know where you want to end.

When you have a financial plan, it’s easier to make financial decisions and stay on track to meet your goals too. Action improves motivation so take massive action. Get serious about your financial planning.

Here are some common excuses you should avoid at all costs:

  • “I want to better manage my finances, but I’m not sure where to start.”
  • “I don’t have time to do my financial planning.”
  • “I don’t have sufficient expertise in certain areas such as investments, insurance, taxes or retirement planning.”
  • “I have immediate more urgent prioritizes.”

Most people in America are not financially healthy. Don’t be like most people.

What percentage of people have a financial plan?

To that point, 75 percent of Americans plan their finances, with no help from a professional or online service. According to a CNBC and Acorns Invest In You Savings Survey: Only 17 percent said they use a financial advisor.

Simply, a financial plan gives you direction for your investments. Financial planners give you accountability. And if you’re not doing enough financial planning, you’re not the only one. Sometimes you simply need someone to do it for you.

So don’t beat yourself up about it. Rather, get honest and fight through the fear of denial and procrastination. Show yourself the self-love you deserve because you are worthy of unlimited success. Ask for help if you need it.

Planning in 2020 and beyond

According to a recent Nerdwallet survey, here are some interest findings from 2019:

  • 7 out of 10 Americans encountered anxiety when it came to how they invested their money.
  • 35% say they wish they invested more.
  • 16% say they wanted to invest more aggressively.
  • 15% wish they’d made more trades in 2019.

Financial Planning For a Business Plan

Are you an entrepreneur? Do you manage a business? Is managing a company your full-time job? Regardless of your job title at work, financial planning is also crucial in the business plans that build businesses.

There are a lot of similarities between professional and personal financial plans:

  • Businesses (like families) rely on each other and synchronously work together. Your planning for personal or professional success impacts more than just you. It’s a team effort. The same thing goes for our clients and our company. We work as a team to help people achieve their financial goals.
  • Planning a business is like planning for life. That’s right. It’s not just about making a lot of money. You need a budget and goals. And you need to be very clear about the path you’re on.
  • Bottom line: If you make more than you spend, you’ll improve your finances. And if you spend more than you make, you’ll go broke. In business, overspending can lead to your business needing to shut down. With family finances, bad planning can mean your family living on the street (if you earn less money than you spend).

Financial Planning For a Business Plan

Are you an entrepreneur? Do you manage a business? Is managing a company your full-time job? Regardless of your job title at work, financial planning is also crucial in the business plans that build businesses.

There are a lot of similarities between professional and personal financial plans:

  • Businesses (like families) rely on each other and synchronously work together. Your planning for personal or professional success impacts more than just you. It’s a team effort. The same thing goes for our clients and our company. We work as a team to help people achieve their financial goals.
  • Planning a business is like planning for life. That’s right. It’s not just about making a lot of money. You need a budget and goals. And you need to be very clear about the path you’re on.
  • Bottom line: If you make more than you spend, you’ll improve your finances. And if you spend more than you make, you’ll go broke. In business, overspending can lead to your business needing to shut down. With family finances, bad planning can mean your family living on the street (if you earn less money than you spend).

What percentage of people have a budget?

Here are more numbers that make things, even more, crystal clear:

  • A Gallup poll discovered just 1/3 of Americans (32%) prepare a household budget.
  • According to the latest 2018 data from the Federal Reserve: Americans hold over $1 trillion in staggering credit card debt ($1,023,000,000,000). 
  • Nonrevolving debt (loans) total over $2.8 trillion ($2,842,400,000,000).

Want more eye-opening statistics about financial plans? There’s more:

  • Only 40% of small businesses are profitable.
  • 52% feel behind on their retirement savings goals.
  • 57% of Americans had less than $1,000 in a savings account.
  • About 77 million Americans, or 35 percent of adults with a credit file, have debt in collections reported in their credit files.
  • Just 46 percent of Americans have an emergency fund.

So many options, so little time

In today’s abundance of options for banking and investing, it can be overwhelming.

According to the Bankscope Global Banking Database, there are over 30,000 banking establishments with licenses worldwide.

Don’t overcomplicate the process for you, your wedding, your children’s tuition, your business, or anything else that needs money to survive and thrive. Remember, that’s something we went over at the beginning of this guide.

Financial planning is not just about surviving. It’s about thriving.

Get clear on your financial goals. After you go through the step-by-step process above, check out some of these helpful resources to get your plan started.

Here are some popular apps for financial goals:

Apps For Financial Planning

Mint is a practical app for financial planning. Something that people like about Mint is that the app allows you to set your financial goals. Since Mint is available as a mobile app, as well as on iPhone and Android, it’s super useful for everyone. You can also get it through windows and the internet.

Here are other popular financial planning and budgeting apps:

More Financial Planning Apps

  • Mvelopes (iOS, Android)
  • Expensify (Web, Android, iOS, Windows Phone)
  • Every Dollar (iOS, Android)
  • You Need a Budget (iOS, Android)
  • Wally (iOS, Android)
  • Spendee (iOS, Android)

Financial Budgeting Apps

Next, let’s look at some popular apps for financial budgeting:

  • Mint
  • Intuit
  • Count
  • Moneydance
  • Personal Capital
  • Acorns
  • You Need a Budget
  • Mvelopes
  • Quicken

Best Apps For Planning Your Finances

In a recent industry study, here are some rankings of apps: 

  • Best Debt App: You Need a Budget
  • Best Tracking Expenses App: Wally
  • Best App for Easy Saving: Acorns
  • Best Cryptocurrency App: Coinbase
  • Best Investing App: Robinhood
  • Best App for Freelancers: Tycoon
  • Best Cost-Splitting App: Venmo

And here are some more best of the most popular apps:

Best Apps For Financial Tracking

Best Apps For Financial Tracking

  • Best Money Management App: Mint
  • Best App for Easy Saving: Acorns
  • Best Cryptocurrency App: Coinbase
  • Best Debt App: You Need a Budget
  • Best Tracking Expenses App: Wally

Remember the saying: an apple a day keeps the doctor away? Well, financial education helps keep credit cards and debt away. It’s true. Great planning is a result of constantly learning.

There’s more!

Here are some apps for financial education:

Financial Education Apps

  • Mint.com
  • Learnvest
  • The Simple Dollar
  • Robinhood App
  • Stacking Benjamins Podcast
  • So Money Podcast
  • The Tim Ferriss Show Podcast

Congratulations on committing to improving your finances today. 

You made it to the end!

Need help? Get in touch with us today. We’d love to help you create a custom financial plan so you can live the life you deserve.

Contact Us

If you or anyone you know is interested in learning more about how Millennium Planning Group can help you manage retirement during a crisis and reach your goals do not hesitate to ask a question here.

Michael Whitman is an advisory representative offering investments and advisory services through Lincoln Financial Securities, Member SIPC. LFS-3080758-051120